No Room at Nut Tree. But Why?
Monday, January 26, 2015 at 9:50AM
Admin in Business Law, Commercial Real Estate, Federal Law, General Business, Litigation, Stephen T. Holzer

Litigation Los AngelesEnvironmental & Business Litigation Attorney 

Stephen T. Holzer
818.907.3299

 

Real Estate Litigation AttorneyA pregnancy clinic that offers ultrasounds and counseling to expectant mothers signed a lease last October at the Nut Tree Road Medical Arts Center in Vacaville California. Alpha Pregnancy Clinics was looking for more square footage and a more medical environment – Nut Tree seemed to offer a facility that suited the clinic's needs. Alpha delivered a signed lease and deposit check to the broker agent on October 31, 2014.

Premier Commercial, the leasing agency representing the building's owners returned the unsigned lease and the uncashed deposit check five days before Alpha was to receive the keys for the office space.

The letter from Premier's agent dated November 10, 2014 states, "the ownership informed me only of their decision not to move forward, stating that the lease was not a good fit for the building". Premier's broker further noted that the owners did not like the short term – the lease was good for one year.

Speculation arose concerning the "not a good fit" portion of the letter. Alpha is a church-funded clinic. The organization's counseling highlights abortion alternatives. And the office space the clinic intended to lease was right across the hall from a Planned Parenthood clinic.

Hence, a lawsuit (copy attached). The lawsuit filed on behalf of the Alpha pregnancy clinic against the building's owners by the Pacific Justice Institute alleges the lease was not honored because of Alpha's religious views and opposition to abortion, a violation of California's Unruh Civil Rights Act. The Institute's complaint says the medical center's owners are obligated to lease the office to Alpha and that the owner's refusal constitutes a breach of the lease agreement.

Further, the owners' refusal is "willful, oppressive, and done with malice because of an underlying animus towards Alpha's membership in a protected religious group." A Solano Superior Court hearing is tentatively scheduled for April.

Lessons for Commercial Landlords

The lease says (it's attached to the Complaint):

3.2 Tenant shall not use, occupy or permit the use or occupancy of the Premises for any purpose which Landlord, in its reasonable discretion, deems to be illegal, immoral or dangerous; permit any public or private nuisance; do or permit any act or thing which may disturb the quiet enjoyment of any other tenant or occupant of the Building.

The owners have a colorable claim that the proximity between the Alpha pregnancy center and the Planned Parenthood office might disturb the “quiet enjoyment” of the Planned Parenthood tenant and be a breach of the quiet enjoyment covenant that is presumably contained in that existing tenant’s lease. On the other hand, given the Unruh Act’s proscription of discrimination against the Alpha pregnancy center because of its religious views, the issue is hardly free from doubt, especially since the prospect of clashes between Alpha and Planned Parenthood is at this point only speculative. 

Landlords with controversial tenants who may have an Unruh Act claim need to develop a record to show that any rejection of leasing to that prospective tenant is not motivated by a discriminatory motive but rather reflects a legitimate business reason for the rejection.  Merely having the leasing agent say that the rejected deal is not “a good fit” is likely inadequate—the agent here should have cited a specific, non-proscribed business reason for the rejection.

It is true that the agent claimed a reason for the owners’ rejection was that the owners did not want a short-term (one-year) lease.  But instead of outright rejecting Alpha as a tenant, the owners would have been smart to counter-offer a more extended lease—e.g., 5 years—and possibly thereby induce Alpha, rather than the owners, to be the rejecting party.

Stephen T. Holzer is an Environmental and Business Litigation Attorney. Contact him via email: sholzer@lewitthackman.com, or by phone: 818.907.3299. 

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