[RPPTL LandTen] New Case

Wed Nov 4 14:11:59 PST 2009

On Appeal
3rd DCA says landlord can't drop lease over lack of witnesses

November 03, 2009	 By: Julie Kay 	

NMB Plaza on 163rd Street

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lack of witness signatures is not enough to invalidate a 10-year lease
on a North Miami Beach office in an escalating market, a state appellate
court has ruled. 

The key question of witnesses is not a typical or often pivotal issue in
landlord-tenant disputes, real estate lawyers say. 

"I don't know that I've ever seen this in a litigated case," said Scott
Topolski, a real estate shareholder with Buckingham Doolittle &
Burroughs in Boca Raton, who was not involved in the case. "Even if the
formalities were not 100 percent adhered to, with witness signatures,
usually the tenant wants to rent the space and the landlord wants to
rent it out. This is a little bit funky." 

The 3rd District Court of Appeal last week sent the case back to
Miami-Dade Circuit Judge Robert Scola to allow Skylake Insurance Agency
to pursue damages. 

The case filed in 2005 dealt with a 10-year lease signed by Skylake for
space at NMB Plaza on 163rd Street. NMB Plaza was building a high-end
office-retail complex in the high-traffic corridor and secured such
tenants as Starbucks and Fed Ex Kinko's. 

Skylake, which has offices throughout South Florida, approached the
landlord as soon as the "For Lease" sign went up and signed the lease in
2003. But in 2005, NMB notified Skylake that the signed lease was
invalid because it had not been witnessed. 

Scott Orth, a Miami Shores solo attorney representing Skylake, said
rental rates skyrocketed after the signing, NMB no longer wanted to
honor the Skylake lease, and the landlord used the witness loophole. 

"The landlord was being greedy," he said. 

But Bennett Feldman, a Coral Gables solo attorney who represents NMB,
said the landlord invalidated the lease as soon as it was discovered
there were not two witnesses. As for whether there was any underlying
reason or a higher-paying tenant in the wings, Feldman said, "I really
wouldn't know." 

The appellate panel noted NMB "could have cured this deficiency at any
time but failed to do so, instead relying on the absence of witness
signatures to disavow the contract." 

Skylake sued in 2005 on claims of specific performance and breach of
contract. Scola ruled in favor of the landlord, granting summary
judgment by ruling NMB was within its rights to terminate the lease due
to the lack of witness signatures and ruling out damages. 

The appellate court ruled in favor of the tenant earlier this year and
reviewed the case again on NMB's request for rehearing. At that point,
the court reached out to the Bar section to weigh in. 

The Bar addressed two seemingly conflicting state laws on the signature
requirements by recommending the court invalidate the lease but allow
the tenant to sue for damages. The court followed the section's
position. 

"It was the resolution of two conflicting statutes," Orth explained.
"Finally, this issue has now been resolved." 

Appellate Judges Gerald Cope, Juan Ramirez and Vance Salter affirmed
Scola on specific performance and reversed him on the damages question. 

The judges ruled state law on witness signatures allows no exception for
limited liability companies like NMB. They also noted when a landlord
drafts a lease and fails to get the signatures, "the landlord will not
be allowed to profit from its own wrong." 

"Stated differently, the landlord breached the implied covenant of good
faith and fair dealing," Cope wrote for the unanimous panel. 

State records list NMB's managers as Ike Rosen and Joseph Eshkenazi, who
list a shared post office box in Panama as their address. 

Orth, who said the court ruled "correctly," will seek a jury trial on
damages and is seeking six figures in lost profits. 

"That was a very attractive location. That is a high-traffic corridor,"
Orth said. "My client waited two years for the building to be completed
and didn't take space anywhere else." 

Feldman said he might ask the appellate court to elaborate on the
grounds for reversing on damages and doubted he could take the case to
the Florida Supreme Court. 

John W. Little III of the West Palm Beach office of Brigham Young, who
filed the brief for the Bar committee with Robert W. Goldman of the
Naples office of Goldman Felcoski & Stone, said he thinks the opinion
sets precedent. 

"I received a call from a lawyer today that had a similar case with
signature requirements, a similar pattern, believe it or not," Little
said. "So I do think the opinion is helpful to practicing lawyers
because it lays out several issues of law. The section advised that in
its view, the Legislature has only come up with one exception to the two
witnesses involving corporations, and there is no exception for limited
liability companies." 

Little, who handled the case pro bono, does not expect the case to go to
the Supreme Court. 

"They'll probably battle the damages out in court," he said. 

Several other lawyers who read the ruling said the panel followed the
law. 

"I think it's the right decision," Topolski said. "I think the court
strictly construed that a lease has to be signed by two witnesses. It's
a strict construction of the statute." 

Lyn Harris, a shareholder with Cartlon Fields in West Palm Beach, agreed
with the ruling but wondered how often a commercial lease lacks two
signatures. 

"When lawyers are present, I'm sure it is done correctly. But when it's
done by in-house people, maybe by a management company, it might happen
fairly often that they don't get witnesses," she said. 

The moral of the story in the lawyers's view is always get two witnesses
for leases, contracts and most legal documents. 

Arthur J. Menor 
Partner  
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