Get Your Permits or a Billboard Lease May Not be Valid

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A failure to get necessary permits may void your rights in a billboard lease.  That’s the lesson of Clear Channel Outdoor v Schrem Partnership.  Here are the facts:

  • In 1986 Ackerley Communications entered into a 15 year lease to place a billboard on property owned by Schrem Partnership.
  • The lease provided that Ackerley would remove the billboard on 30 days written notice if the property were sold.
  • Ackerley erected two billboards on the property but failed to obtain permits from the Washington DOT.
  • In March 2002 Ackerley entered into a second lease with Schrem.  The new lease did not contain language saying that the billboard must be removed on written notice following a sale of the property.
  • Ackerley assigned its rights in the new lease to Clear Channel Outdoor.
  • In 2005 Schrem sold the property to JLO enterprises.  The City of Federal way refused to issue any development permits unless the billboards were removed.
  • On January 14, 2005 Schrem gave Clear Channel three days written notice to remove the billboards.  Clear Channel refused to vacate the property saying that the lease was valid.
  • On March 9, 2005 Schrem removed the billboards.  Clear Channel sued for damages including loss of advertising income.
  • During discovery, Schrem found out that neither Ackerley nor Clear Channel had obtained permits from the Washington State Department of Transportation for the billboards.  Schrem moved for summary judgement on ground that the billboards had no permits so the billboard lease was illegal and unenforceable.
  •  A trial court  and appeals court agreed and dismissed Clear Channel’s case: “The 2002 lease was void on its face since its main purpose contravened the language and policy of the sign code.  An agreement that violates a state statute or a municipal ordinance is an illegal contract and void.”  In addition Clear Channel Outdoor had to pay $76,000 in legal fees and costs to Schrem.

Billboard Insider’s take:  Make sure your permits are in order or your lease rights are void.

 

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