Landlord Couldn’t Collect 'Additional Rent' Not Mentioned in Lease

Facts: A shopping center owner and a restaurant tenant signed a lease for a certain amount of space. Under the lease, the tenant was required to pay monthly rent consisting of two components. The first component, called “Minimum Rent,” involved a flat, base amount calculated on the amount of square footage of leased space. This base rate was graduated to increase annually over the term of the lease. The second rent component, called “Additional Rent,” involved the proportionate share of the shopping center’s property taxes, common-area maintenance fees, and utility bills.

The owner and tenant later signed a first and a second amendment that had the effect of adding more space to the tenant’s restaurant, to be used as a catering area. The additional space was called the “Expansion Premises” in the second lease amendment, which provided: “In addition to all other amounts due and payable by Tenant pursuant to the Lease, Tenant covenants and agrees to pay Minimum Rent for the Expansion Premises during the Lease Term for the Expansion Premises.…” There was no specific reference in the second amendment to any “Additional Rent.” The second amendment further provided, “In the event of any conflict between the Lease and this Amendment, the terms and conditions of this Amendment shall control.”

After the owner billed the tenant for property maintenance and taxes for the expansion premises, the tenant refused to pay. It claimed that those costs were “additional rent” costs and that it wasn’t required to pay additional rent for the expansion space—only the original space. The owner sued the tenant. A district court ruled in favor of the owner, and the tenant appealed.

Decision: A Kansas appeals court reversed the decision of the lower court.

Reasoning: The district court improperly interpreted the second lease amendment. The district court construed the lease agreement—the original together with the second amendment—to be clear and unambiguous on its face regarding the obligation of the tenant to pay Additional Rent for the expansion premises.

But the appeals court noted that the purpose of the second amendment was clearly stated as providing terms for the tenant to lease an additional 2,000 square feet of unimproved space in the shopping center for catering. The second amendment specifically provides that the tenant agrees to pay “Minimum Rent for the Expansion Premises” at a flat rate per month. The second amendment is wholly silent as to any obligation or undertaking to pay “Additional Rent” for the expansion premises. Since the terms “Minimum Rent” and “Additional Rent” are capitalized, specifically defined terms under the original lease agreement, the failure to specify the applicability of “Additional Rent” to the expansion premises would be a strong indication on the face of the document that the parties intended no such obligation, said the appeals court. The court noted that other language backed up that viewpoint: The second amendment provides that the terms and conditions of the amendment would control any conflict with the original lease.

The original lease and the second amendment clearly establish two separate payment obligations undertaken by the tenant—Minimum Rent and Additional Rent for the original space and Minimum Rent for the expansion space, the appeals court determined. It concluded that the tenant has no obligation under the second amended lease for payment of “Additional Rent” in addition to the “Minimum Rent” specifically set forth for the expansion premises.

• Regency Square North Shopping Center 14, LLC v. Kansas Kurry, LLC, May 2017