Tufeld Corp. v. Beverly Hills Gateway, L.P.
Facts: A tenant purchases a leasehold interest in a ground lease. The tenant enters into an amendment of the term of the lease with the landlord extending the term beyond 99 years. The tenant pays the landlord increased rent and an additional fee for the extension. Later, the landlord discovers the term lease as extended violates the rule against perpetuities. The landlord seeks to cancel the lease agreement as void.
Claim: The landlord claims the amended lease agreement, due to the extension beyond 99 years, is void since it exceeds the rule against perpetuities.
Counterclaim: The tenant claims the rule against perpetuities cannot be used by a landlord to void a lease agreement.
Holding: A California appeals court holds the tenant’s lease agreement is valid up to statutory 99-year limitation and awards the tenant a pro-rata portion of the fee paid to extend the lease term beyond 99 years, since the landlord was unable to agree to a remaining term of more than 99 years under the rule against perpetuities. [Tufeld Corp. v. Beverly Hills Gateway, L.P. (2022) 86 CA5th 12]
Tufeld Corp. v. Beverly Hills Gateway, L.P.
Related Reading:
Property Management: Chapter 48: Lease renewal and extension options – Future uncertainty
