California Court of Appeal Allows Tenant's Fraud Suit Against Shopping Center Landlord Based on Estimates for Real Property Taxes, Insurance and Common Area Maintenance Fees in Letter of Intent to Proceed


Last week, the California Court of Appeal for the Second District reversed a trial court’s decision which dismissed a tenant’s lawsuit against a shopping center landlord based on the disparity between estimates of certain charges provided by the landlord prior to lease execution and the amounts billed by the landlord after the tenant’s first full year of occupancy.

The Letters of Intent and the Lease -

The landlord and tenant entered into lease negotiations and exchanged draft letters of intent in 2004. The landlord provided the tenant with estimates of what the tenant would pay annually per square foot for common area maintenance fees (CAM), real property taxes and insurance (collectively, the “triple-net charges”). The parties executed a written lease in 2005. Although the lease did not contain specific amounts or percentages for the triple-net charges payable by the tenant, it did specify that the tenant would pay its pro rata share of the triple-net charges based on the square footage of the leased premises and the gross leasable area of the retail portion of the development. The lease also contained fairly standard integration language (i.e., the lease represents the entire agreement of the parties notwithstanding prior negotiations or discussions, etc.).

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