Lease Audit Information
TOPIC OF THE WEEK:
Cafeteria Operators, L.P. v.
Coronado-Santa Fe Assoc., 952 P.2d 435 (NM Ct. of Appeals
In this decision, the New Mexico Court of Appeals affirmed
the determination of the trial court that the Landlord
charged excessive and unjustified common area maintenance
charges by creating a subsidiary maintenance company and
billing Tenant inflated costs. Included in the charges of
the subsidiary, "Kinder Maintenance", were management costs
and profit on top of the actual maintenance costs. The trial
court determined that the Landlord could only transfer the
"actual costs" of the maintenance. Per the Lease, Tenant was
only obligated to pay its "proportionate share of costs and
expenses of maintaining and operating the common areas".
In addition, the Court of Appeals affirmed the
decision of the trial court to award punitive damages to the
Tenant stating that the Landlord's profit-making subsidiary
was an "intentional and malicious end run around the CAM fee
provisions of the lease".
The court also agreed with the Tenant that
Landlord's expenses in overseeing maintenance work performed
by others is simply one of the costs of operating the
shopping center, and compensated by rents.
Management Corporation v. Stone & Webster Engineering