Dueling Landlord and Tenants

Court of Appeals rules on commercial lease dispute.

Commercial tenant Outloud Entertainment Group, Inc. rented two spaces from its commercial landlord Group 44, Inc.—one rental space in Seattle and the other in Tacoma.   Tenant Outloud operated dueling piano bars in the spaces. The commercial lease required tenant Outloud to pay base rent plus monthly assessments for taxes, insurance, and maintenance.

Ebony Keys, LLC entered into an agreement to buy the piano bar in Tacoma from Outloud.  As part of the business purchase, Outloud provided a copy of its lease with landlord Group 44—but did not include the addendum referencing the monthly assessment charges.

Group 44 approved the assignment of the lease from its tenant Outloud to Ebony Keys. Ebony Keys began paying the base rent, but not the assessments. Landlord Group 44 demanded the assessments. Group 44 and Ebony Keys attempted to negotiate a new lease, but could not agree on the terms.

Group 44 sought to evict Ebony Keys in an unlawful detainer action. The parties entered into an agreement to dismiss the eviction, and to preserve claims against one another pending the outcome of a lawsuit by the new tenant, Ebony Keys, against the original tenant, Outloud.

Eventually Group 44 joined the lawsuit and presented claims against both its commercial tenants. The trial court entered a judgment against Ebony Keys for the base rent amount, but not the assessments. Landlord Group 44 appealed.

The Washington Court of Appeals concluded that landlord Group 44 was entitled to reasonable rental value under the legal doctrine of quantum meruit, also known as an implied contract. The Court of Appeals found that the trial court erred when it determined that the landlord was entitled to only the base rent, but did not make any findings that this was a reasonable amount as compensation for the use and occupancy of the property. The Court of Appeals remanded to the trial court for further findings.[1]

By Landlord-Tenant Attorney Travis Scott Eller





[1] Ebony Keys v. Outloud Entertainment Group, Inc., et. al., unpublished (No. 44985-4-II September 30, 2014).