Recent Successes and Deals Closed (more details)

Andrew Pauly – Court Of Appeal Affirms Judgment For Shoreline’s Client, Ordering Enforcement Of Its Beverly Hills Ground Lease Through 2102.

In 2003, Shoreline’s client purchased the ground lease of a prime Beverly Hills commercial property improved with a large office and retail building.  The lease was set to expire in 2058, but after a few years the landlord agreed to extend it through 2123, in return for a $1.5 million up-front payment.

Ten years later, in early 2018, the landlord sued the firm’s client and invoked California Civil Code section 718, which invalidates city lot leases longer than 99 years.  The landlord sought to terminate the entire lease as illegal, or at least cancel the extension agreement.  In a bench trial involving Shoreline and title insurance counsel, the trial court ordered enforcement and validity of the lease through 2102.  Rejecting the landlord’s position, it found that the 2003 purchase constituted a lease novation that restarted section 718’s 99-year limit.  The court therefore shortened the lease by just 21 years to 2102 instead of 2123 and ordered the landlord to return a pro rata portion of the $1.5 million payment as restitution.

In a published December 2022 opinion, the Second District Court of Appeal addressed the history of California lease term limitations, predecessor limitations in New York, and similar restrictions in English common law.  The court unanimously affirmed the rulings enforcing the lease through 2102 and awarding restitution to our client.  The court also agreed with our client’s argument that the trial court had authority to award interest on the restitution award and reversed its contrary order.  The combined interest and restitution award to our client could be quite significant.  The Court of Appeal also denied the landlord’s petition for rehearing.

The appeal involved at least 6 law firms on both sides and included Andrew Pauly of Shoreline for the successful tenant and our client.