Record your leases and make sure your termination provisions are clear.  Two takeaways from Lamar Advertising vs Larry and Vikkie Nicholls.  Here are the facts.

• In March 1990 Frontier Outdoor entered into a 15 year lease to put a billboard on land in Rock Springs Wyoming.  The lease had a provision for automatic renewal unless either party terminated the lease 30 days prior to expiry.  The lease was never recorded.
• The land was transferred several time and ended up in the hands of Larry and Vicki Nichols. The lease was transferred several time and ended up in the hands of Lamar Advertising.
• On July 26, 2005 the Nicholls notified Lamar that the lease had expired and would not be renewed.  Lamar claimed that the lease had been renewed automatically because Nicholls did not give notice to terminate by February 1, 2005 as required by the lease.
• Lamar went to court seeking a ruling that the lease was effective.  Nicholls objected saying that the lease was not binding because it was not notified of the lease when it purchased the property.  Nicholls also claimed that the lease was void as an unreasonable restraint on alienation because the property could not be developed as long as the billboard lease was in effect.
• A district court ruled that Nicholls had notice of the lease but that the lease was void as an unreasonable restraint on alienation.
• The Wyoming Supreme Court ruled in favor of Lamar.    The 15 year lease term had  reasonable commercial basis in that it allowed Lamar to recoup upfront capital costs.  The 30 day notice clause on termination was reasonable in that it provided Lamar a chance to find a new location and execute a new lease if the existing lease was terminated.  The court also rejected Nicholls allegations that a Rock Springs city ordinance prohibited it from obtaining a building permit while the sign was on the property because “the record does not contain the ordinance or any testimony that an application for a building permit was denied.”

Insider’s Take:  Record your leases whenever possible.  Although Lamar was ultimately able to prevail this case demonstrates that landlords will attempt to claim that a lease is not binding because they were not notified when they purchased a property.  The case also demonstrates the importance of having clear termination language.   During the court proceedings Nicholls abandoned its claim that the lease did not renew automatically.

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