Business and Legal Insights

A common theme of the cases and issues discussed in this blog is that document drafting is at the root of many commercial real estate disputes (such as here, here, here, and here).  It’s usually the case that the parties don’t notice the drafting issue until a problem arises.  A new case provides yet another example.

Haggin v. Allstate Investments, Inc. is about a lease guaranty and whether it covered extensions of the lease term.  In 1998, the tenant executed a lease for commercial space with the following term:

Landlord grants to Tenant an option to renew this Lease for one (1) additional three (3) year term subject to the following:…(e) All other terms and conditions of this Lease shall remain unchanged with the exception of monthly Base Rent which shall be increased during the renewal term of each anniversary of the Commencement Date . . . .

At the same time, a guarantor signed a separate guaranty that stated that the guarantor “agree[d] that this guarantee shall remain for the renewal, modification, extension or waiver of this Lease.”  The lease was amended and extended several times beyond the initial term and three year extension option provided for in the original lease.  The guarantor never signed any of the amendments.  Eventually, in 2012, the landlord sued the tenant for breach of the lease for failure to pay rent, and sued the guarantor under the guaranty.

In his deposition, the guarantor said that he signed what he thought was a guaranty of a “three year lease.”  Interestingly, the guarantor also agreed with landlord’s counsel that it appeared that the later lease extension at issue – beyond the original 3 year option in the lease – did appear to be covered by his guaranty.  The landlord moved for summary judgment and included an affidavit stating that he never would have done the deal without the guaranty covering any extended lease term.  The guarantor also moved for summary judgment and filed an affidavit stating that he never knew about the various lease amendments.  The trial court found that the guaranty was ambiguous on the point in dispute, but ruled for the landlord.

The appellate court disagreed and reversed that decision.  The court noted that in Florida, a lease guaranty can be continuing, but it must specifically state that it covers future extensions of the lease term or other future agreements between the landlord and tenant concerning the lease.  Examining the lease and guaranty, the appellate court ruled that the lease was unambiguous that it included only a single three year renewal option and therefore, that was all the guarantor guaranteed.  Further, the guaranty made no mention of covering anything but the original lease; it made no mention of possible future renewals.

In the end, it came down to the lease and guaranty language on which the parties agreed.