By Richard Rothfelder, Rothfelder and Falick

Insider has published articles on providing prospective buyers of property encumbered by signs and leases with actual and constructive notice of the outdoor advertiser’s interests and including notice of the right of first refusal in billboard leases. Insider brought to my attention a case that graphically demonstrates these principles, namely Lamar v. Aric. Here are the facts and holdings in this 2015 case decided by the Pennsylvania Superior Court:

• In March 2008, Brad Aric entered into a 10 year billboard lease with Lamar. The lease required Lamar to be notified of a pending sale, and it granted Lamar the right to purchase a perpetual easement within 20 days notice of such a sale. The lease apparently was not recorded in the real property records.
• Lamar constructed a sign on the property with a clearly posted logo.
• In January 2011, Aric sold the property to Prime Diversified Services (“PDS”).  PDS was informed of the lease during the purchase.  In fact, a PDS representative stated to the seller that the lease payments from Lamar were inadequate, and PDS was going to force Lamar to pay more.
• No written notice of the pending sale was provided to Lamar.
• In March 2011, PDS returned Lamar’s annual rent checks,  claiming the lease was invalid and didn’t survive its purchase of the property.
• Lamar filed suit against both Aric, the original landowner, and PDS, the buyer, for breach of the lease, seeking specific performance and enforcement of the terms of the lease, including the right of first refusal to purchase the perpetual easement.
• PDS refused to convey a perpetual easement to Lamar, arguing it was not bound by the lease or aware of Lamar’s tenancy.
• Lamar won a summary judgment at the trial court, which was affirmed by the appellate court, and the Defendants were ordered to convey to Lamar the easement under the terms of the lease. In so ruling, the court “found that PDS had notice of Lamar’s tenancy in possession, [including because] the sign, displaying Lamar’s name, was present both before the sale of the property and at closing.”
• The court also awarded Lamar attorneys fees, which was also provided for under another provision of the lease, held to be enforceable despite the sale of the property.

Rothfelder’s Take: A buyer of property encumbered by a sign and lease will acquire the property subject to the outdoor advertiser’s interests,  if the buyer has notice of such interests. The easiest and safest way to insure the sign lease survives the sale of the property is to record the lease, or a memorandum of the lease, in the real property records. Doing so automatically and constructively affords all prospective land purchasers of the interests under the sign lease, and even imposes a further duty to conduct reasonable investigations and exercise due diligence to ascertain the terms of those interests. Even in the absence of this type of record notice, however, a purchaser of land will be bound by a sign lease if he has actual knowledge of it. For example, in Lamar vs Aric the land purchaser, PDS, knew about Lamar’s lease, even contending the rent was too low, and couldn’t help but notice the sign containing Lamar’s logo. Thus, Lamar’s lease remained enforceable and binding after the sale, including the clauses containing the right of first refusal and recovery of attorneys fees.

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