In the case of Tufield Corporation v. Beverly Hills Gateway, Case No. B314862 (2022 ), the court got back to basics in this landlord-tenant dispute. It found that a lease going beyond 99 years is void under the law as a suppression of California public law encouraging the complimentary exchange and development of land. The primary concern on appeal is whether a lease that violates Civil Code area 718 is void or voidable and is basically a problem of first impression. The court held that the part of the lease going beyond 99 years was void.
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Factual Background

In this business landlord-tenant dispute, the celebrations disagree on the enforceability of a lease. The plaintiff, cross-defendant and appellate is Tufield Corporation- the property manager in this conflict. Beverly Hills Gateway L.P. (BHG) is the occupant. Tufield is a family-owned business that owns prime location industrial residential or commercial property in Beverly Hills. Back in 1960, Tufield consented to rent this residential or commercial property to two occupants with a ground lease regard to 99 years ending in 2058. The lease was 6% of the appraised value of the residential or commercial property subject to routine reappraisals. The tenants constructed a workplace building on the residential or commercial property in 1964. Douglas Emmett Real Estate Fund was the tenant staring in 2003.

Also in 2003, BHG purchased Emmett’s interest in the ground lease. Emmett leased and appointed its interest to BHG and 2 other companies. Those 2 other companies instantly granted and appointed their interest to BHG in a nearly synchronised transaction. BHG obtained financing for these transactions from a loan provider. In 2007, BHG was considering a renovating project on the residential or commercial property, but desired to extend the lease to make its expenses more worthwhile. In an executed change to the lease in 2007, BHG and Tufield accepted extend the lease term through December 31, 2123 and future lease was increased to 6.5% of the evaluated value. BHG also paid Tufield $1.5 million as part of the brand-new agreement. The celebrations also formulated a memorandum of the contract in which Tufield accepted offer BHG a right of very first rejection need to any other celebration present an authentic offer to buy the residential or commercial property. As a result of this deal, BHG refinanced its loan and obtained $47 million from a new lender. Tufield likewise signed an estoppel certificate, that included a term verifying that the lease terminated on December 31, 2123.

BHG finished $8.8 million in restorations over several years. In 2016-2017, Tufield increased the month-to-month rent from $30,500- $200,000 based upon an appraisal of the residential or commercial property value. BHG opposed this increase and the parties litigated the matter, however settled before any judgment was reached by the court. In late 2017, BHG re-financed its loan a second time borrowing $49 million. A 2nd estoppel certificate was provided by Tufield once again validating that the lease terminated on December 31, 2123. BHG used some of the new loan monies to make further enhancements to the residential or commercial property.

Soon after this took place, Tufield’s president found out that rents longer than 99 years are invalid under Civil Code area 718. Tufield then submitted a complaint for declaratory relief and quiet title versus BHG. Tufield requested a cancellation of the ground lease, or in the alternative, a cancelation of 2007 change based upon the reality that the lease term was more than 99 years.

BHG cross-complained for declaratory relief, unfair enrichment and reformation of the contract. BHG claimed that area 718 was not appropriate to the ground lease and likewise looked for a statement that the ground lease stood for 99 years. The celebrations engaged in a bench trial in which the court concluded that BHG’s acquisition of the lease from Emmet in 2003 was a novation and that the lease term need to run through 2102. The court also identified that the lease was void pursuant to section 718 due to the fact that it went beyond 99 years. It likewise found that BHG might not impose its estoppel, laches and waiver defenses. It reasoned that permitting such equitable defenses would require enforcement of the ground lease through 2123, which was difficult according to the law in place. Both parties appealed.

Civil Code Section 718

Civil Code section 718, relevant to this case, states: “No lease or grant of any town or city lot, which schedules any lease or service of any kind, and which offers for a leasing or giving period in excess of 99 years, will be valid.” In figuring out the application of area 718 to the realities of this case, the court first aimed to the legislative intent underlying the statute. The plain text of the statute does not directly address the concern at hand, which is whether a lease term that breaches the statute is void or voidable. Section 718 does not use either term in its arrangements. It does plainly state, nevertheless, that no lease term may exceed 99 years which such a lease “will not be valid.” The words “not legitimate” do not necessarily need that the term is void or voidable. Safarian v. Govgassian (2020) 47 Cal.App.5 th 1053, 1067.

Going Back in Time to Find the Answer

At the time California got its statehood in 1850 it was really the wild, wild west. The California federal government was in its starting phases and had to adopt a legal and judicial system from scratch. From its inception, the common law of England has functioned as the fundamental law of the state, other than where contravened the United States Constitution or California law. (Stas. 1850, ch. 95) As California’s population rapidly grew, the California Legislature finally adopted four codes, consisting of the Civil Code. Known as the “Field Code”, section 718 was initially enacted as one of its arrangements. It originally mentioned, “No lease or grant of any town or city lot, for a longer period than twenty years, in which shall be scheduled any rent or service of any kind, shall be legitimate.” (Former § 718, enacted by Stats. 1872). Section 718 has actually been amended often times, but the essence of its intent has actually remained practically the same. A lease that has a term longer than a particular variety of years will not stand. In 1911 that the time limitation was altered to no more than 99 years. (Stats. 1911. ch. 708 § 1).

Recalling at American history assists modern-day courts to understand the unwillingness to grant land in all time. In 1855, the California Supreme Court held, “A covenant for a lease to be renewed indefinitely at the alternative of the lessee, is, in effect, the creation of an eternity