Beware of billboard lease termination clauses which allow the lease to be cancelled on a sale to a third party. That’s the lesson of International Outdoor versus Dix Road. Here are the facts.
- In 1998 the Donald Golden Trust leased property to Rite Media of Michigan for a billboard. The lease had a 20 year term but gave the lessor the right to terminate the lease if it sold to a third party that did not want to assume the lease.
- International Outdoor acquired the lease by assignment from Rite Media of Michigan.
- Dix Road (a company owned by Donald Golden’s son Richard) purchased the property from the Donald Golden Trust in 2007 and attempted unsuccessfully to terminate the billboard lease.
- In 2008 Dix Road sold the property to defendant Dix Land, a corporation owned by Steven Laffey a longtime business associate of Dix Road owner Richard Golden. After sale Dix Road requested the lease to be terminated so that the property could be developed.
- International Outdoor did not remove the billboard.
- Dix Road sued for eviction and demanded lease termination. International outdoor responded that the sale to Dix Land was a sham due to a lack of consideration and the close association between Richard Golden and Steven Laffey.
- In 2011 a District Court ruled that the termination of the billboard lease was proper. On appeal a Michigan Circuit Court affirmed the lower court ruling even though the sales transaction between Dix Road and Dix Land was “a little fishy.” The State of Michigan Court of Appeals confirmed the ruling.
Insider’s take: There are two lessons here. The first lesson is that there are no sure things when you go to court. Looks to Insider like International Outdoor had a great case but didn’t prevail. The second lesson is that third party language may not protect you from wily landlords who seek to invalidate a billboard lease. Better to avoid termination on sale language.
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