Long-Term Lease Restricting Improvements–Mayer v. Lindenwood Female College

A long-term lease provides this:

The Lessee shall at all times during the term of this lease, subject to the terms and provisions of this lease, have the sole and exclusive right to erect, build, rebuild, repair, change, alter, or otherwise construct such buildings, appurtenances, or other improvements for commercial use as the Lessee in its sole discretion may determine, so long as same are in no instances used for an unlawful purpose, and so long as the value of such improvements shall not be diminished to less than One hundred Thousand Dollars ($100,000.00) as the result of such work.

The brief is at: Mayer v. Lindenwood Female College, No. ED100587, 2014 WL 2116410 (Mo. Ct. App., E.D.). The question: Does this language allow the tenant to replace a building, as long as the improvement value continued to meet the dollar amount? I would think so. The lessor disagrees. Let’s see the brief.

More after the break …

Here’s the lessor’s argument:

In June 2012, Lindenwood removed the building from the Property. (LFII 114 ¶ 31.) Lindenwood’s sole authority in the Lease cited for this action is Paragraph 12 (A42 ¶ 12 (quoted full on page 3 of this brief).) Lindenwood, and the trial court, relied on Southern Real Estate & Fin. Co. v. City of St. Louis, 758 S.W.2d 75, 78 (Mo. Ct. App. E.D. 1988) (en banc) (A18-A19) to justify demolishing and removing the Trusts’ building. But Southern is not on point, as it did not involve the express restrictions that are in Paragraph 12 of the Lease. The rights granted by Paragraph 12 “are subject to the terms and provisions of this lease.” (A42 ¶ 12.) Lindenwood breached the terms and provisions of the Lease, as discussed above. Paragraph 12 does not grant Lindenwood the right to demolish and remove the Trusts’ building.

In Southern, the lease provision at issue stated:

Lessee shall maintain the leased premises in good condition and repair, ordinary wear and tear excepted, at its own cost and expense and may at any time and from time to time at its own cost and expense reconstruct, alter or replace any improvements then existing in such manner as Lessee shall desire.

Id. at 79 (bolded emphasis added). In the instant Lease, the verbs in the clause dealing with changes to the improvements include “erect, build, repair, change, alter, or otherwise construct.” (A42 ¶ 12.) Lindenwood is trying to rewrite the Lease to add the verb “replace.” The majority opinion in the Southern relied heavily on the verb replace in determining that improvements added by the city were an allowed replacement. Id. at 79-80. “Words used in a written lease are interpreted according to their ordinary meaning unless defined in the instrument itself.” Id. at 81. Section 12 of this Lease does not include the verb “replace.” The original parties negotiated this Lease in good faith and had they intended to include that verb they would have done so. Based on Southern, Lindenwood is not allowed to add the verb “replace” to Section 12 after the fact. Finally, even the lease in Southern required the lessee to “maintain the leased premises in good condition.” Id. at 79.

The tenant’s actions appear to include grading and development of a large area, only part of which is the leased premises. The issues concerning grading seem problematic for the tenant. But this part of the lessor’s argument seems strained. Note the brief only makes oblique reference to how the majority opinion in Southern relied on the word “replace”. One supposes that is because more detailed parsing of Southern might not be as favorable. The interested reader can make his own assessment.

Perhaps more important is the context of the string of verbs used in the lease. The lease at issue in this litigation requires the  improvements not be worth less than $100,000 after the “change” or “alteration”. Contractual language is construed in light of its evident purpose. Here the purpose seems reasonably clear: The landlord is protected by requiring there be a building worth at least $100,000 on the property. As long as that happens, the landlord does not have the right to complain about the nature of the building(s) the tenant chooses to build.

The lessor complains about other matters, such as grading, access and maintenance. They present significant questions. And one might well complain about the timing of the demolition, in relation to the timing of new improvements. But a claim that once a building is constructed it has to stay does not seem supported by the evident purposes of the lease provision.