In 1957, Simon and Herman Rosenberg leased their Canal Street, New Orleans property to Eagle Enterprises for a 60-year term set to expire in May 2017. The lease stipulated that the tenant would be given 30-days to cure any breaches under the agreement. An intermediate lessee, Kenneth Lobell, took over the lease from the Rosenberg heirs and assumed all obligations under the original agreement.

When Hurricane Katrina flooded the property in 2005, Lobell and the Rosenbergs got into a dispute about the disbursement of insurance proceeds, the payment of rent and the obligation to repair the premises. Then in December 2007, the Rosenbergs sent Lobell a termination letter, claiming that he had not paid rent since August 2005, failed to pay taxes and maintain proper insurance and that he misused the insurance proceeds to repay a loan rather than repair the building. Lobell responded the next day and made a partial payment on the back rent, but failed to provide proof of insurance or make repairs.

After sending Lobell a supplementary letter in February 2008, they served him with a notice to vacate in May 2008. Lobell filed a petition for writ of possession and a possessory action against the Rosenbergs claiming that he accrued damages because they failed to provide him with time to cure the default under the original lease terms.

The trial court dismissed Lobell’s claims and ruled in favor of the Rosenbergs awarding them $3,647,127.81 in damages. The appeals court vacated the lower court’s judgment finding that the lease was not properly terminated and that Lobell was not given a sufficient period of time to remedy his breach. The Supreme Court of Louisiana reviewed the case to answer one narrow issue: whether the Rosenberg’s default letters complied with the provisions of the lease.

Ultimately the Court concluded the Rosenbergs had acted within their rights under the lease. Despite the lease providing additional “reasonable time (to cure)” breaches that needed more than 30-days to remedy, the court felt the Rosenbergs had provided that here. Also, Lobell had additionally breached the contract by failing to pay taxes and maintain proper hazard insurance. The Court reversed the appellate decision and remanded it to the appeals court for a final decision regarding damages.

Commercial and residential lease disputes can become very heated costing parties thousands and even hundreds of thousands of dollars. It is important for parties to have a carefully drafted lease with specific provisions that are protective, and that when the dispute arises, that proper notice is given for the default. Smiley Law Group attorneys deal with all types of leases. Call today for a free consultation regarding your commercial or residential lease.

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