Many landlords want to terminate a billboard lease on sale of a property.  Ambiguous termination of sale clauses can lead to future disputes.  That’s the lesson of Lamar Outdoor Advertising v Harwood.  Here are the facts.

• In 1994 Pridemark Outdoor entered into a 10 year lease with a 10 year extension with Joseph and Kristi Harwood.  The lease permitted Pridemark to put a billboard on the roof of a building in Spokane, Washington.  The lease had this clause: Special Conditions: (90) day cancellation notice required if property is sold and new owner designs sign removal.  Mr Harwood to furnish name and notify of pending sale.
• Lamar Advertising succeeded Pridemark’s interest in the lease.  In 2004 the lease was automatically extended for an additional 10 years.
• In 2005 Joseph and Kristi Hardwood transferred their interest in the building to Bell-Franklin, LLC. a new entity which was 50% owned by them and 50% owned by Cory and Elisabeth Colvin.  Bell-Franklin converted the building to 7 condominiums.
• In 2008 the top 3 floors of the building were sold to the Spokane Housing Authority.  The Harwoods sent notification of sale and termination of the lease.  Lamar notified the Spokane Housing Authority that because the Harwoods retained an ownership interest in the property the lease was still in effect.
• In October 2008 the Housing Authority removed the billboard to accommodate a renovation of the top three floors.
• In October 2008 Lamar filed suit for damages claiming that the Harwoods had to divest themselves entirely of any interest in the building before the property was considered sold.
• A lower court and appeals court denied Lamar’s claims.  The appeals court found:“The “property in paragraph 11 of the lease that was sold was the roof area of the building.  Franklin was the true owner and gave notice through its manager, Spokane Housing, that the billboard needed to be removed in order to facilitate its remodeling.  The lease was lawfully terminated in accordance with its terms.”

Insider’s take:  If a lease can be terminated on sale of a property make sure you define what a sale involved.  Sale of part of the property or sale of all of the property.  Attorney Richard Hamlin wisely suggests to Insider that the termination clause should exempt sales to entities with power of eminent domain.

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