Real Estate Goliath Topples to Investor David

Real Estate Lease Can't Force Sale

THE INFORMATION CONTAINED IN OUR WEB SITE DESCRIBES LEGAL MATTERS HANDLED IN THE PAST BY THE ATTORNEYS OF SANDS ANDERSON MARKS & MILLER, P.C. OF COURSE, THE RESULTS WE HAVE ACHIEVED DEPEND UPON A VARIETY OF FACTORS UNIQUE TO EACH MATTER. BECAUSE EACH MATTER IS DIFFERENT, OUR PAST RESULTS CANNOT PREDICT OR GUARANTEE A SIMILAR RESULT IN THE FUTURE.

Our client, an elderly property owner, was sued by a major urban university to enforce a provision of a rental contract that purported to require the owner sell the building to the institution at the conclusion of the rental term.

The owner had bought this building in the midst of the urban campus nearly 40 years previously, and the client and the university had a close, long term relationship. In addition, the university was a tenant for a number of years at the property. As part of a lease signed five years previously, the university had inserted a provision that, at the end of the lease term, allowed it an option to purchase the building at a price determined by averaging the property's value based two appraisals that it would pay to conduct. After the end of the term arrived, the university's real estate foundation presented the purchase offer, which the owner turned down. The foundation sued for conveyance of title.

This single building represented an investment that was crucial to our client's retirement income. According to our client, when the lease was signed, he had been assured that the purchase option would not require a sale, but was more like a "right of first refusal", and that it would be based on a fair assessment of the property value. Not only was this large institution now trying to force specific performance of an onerous provision to gain control of valuable real estate within its boundaries, but was attempting to do so at a price that was going to make it nearly impossible for the owner to purchase like property to replace the income it generated.

The lessee felt it had made sure that it would be able to purchase the property for its own use. Therefore, it had gone ahead with appraisals by agents that it typically employed for these purposes. The values determined by both were notably below the market prices for similar properties in the area. The purchase offer was presented within the time required in the lease. Our client, who didn't want to sell the property, but was interested in helping the university, sought out similar replacement property for what the university was offering. A number of discussions between the parties proceeded after the presentation of the purchase offer. As these went on for over a year, the foundation eventually sought to resolve the matter with court action. The owner hired us to represent him.

The foundation first pressed the court to grant it ownership, contending that no factual issues were in dispute. Our attorneys pointed out to the court that both the chronology of the foundation's actions and the valuations returned in the appraisals were in dispute. The court ordered the matters to proceed to trial.

At trial, our attorneys presented evidence and exacted testimony regarding the timing specified in the lease for the valuations, along with the evaluations of additional appraisal experts presented by the property owner. The court ruled in our client's favor that the university had not complied with the terms with regard to the timing of appraisals and could not force the purchase of the property.

For more information on this issue or other law matters, please contact Bill Lehner at (804) 783-7246 or WLehner@SandsAnderson.com or Jeff Geiger at (804) 783-7248 or JGeiger@SandsAnderson.com.