Are Oral Modifications of Written Leases Enforceable in Ohio?

As you may know, as a general rule, commercial leases of real property in Ohio must be in writing to be enforceable. Ohio’s “Statute of Frauds” (ORC Section 1335.04) with respect to leases provides in pertinent part that “no lease… of, in, or out of lands, tenements or hereditaments… shall be granted, except…in writing, signed by the party …granting it”. Ohio’s Landlord and Tenant Act (ORC Section 5321, et. seq.) supersedes the foregoing Statute of Frauds rule with regard to residential leases.

Commercial leases of real property in Ohio must also be properly acknowledged (e.g. notarized). ORC Section 5301.01 provides that leases of non-residential real property whose terms exceed three (3) years must be in writing, signed and notarized (or otherwise acknowledged as provided in ORC Section 5301.01) to be enforceable.

What about modifications/amendments to written commercial leases? Must they be in writing to be enforceable? What if there is a clause in the written lease precluding oral modifications of the lease; does that end the inquiry?

The recent Eighth Appellate District Court of Ohio case, 3637 Green Rd. Co., Ltd. v. Specialized Component Sales Co., Inc., 2016-Ohio-5324, presents a good summary of the law in this regard.

The facts of the case are as follows: On April 17, 1981, 3637 Green Road (“landlord”) and Specialized Component Sales (“tenant”), a distributor of industrial electrical components, entered into a lease for warehouse and office space at 3637 Green Road in Beachwood, Ohio. The original lease was for a term of three years (beginning in 1981), with an option to renew the lease for another three year term. The parties executed six written extensions to the original lease. After the expiration of the final, written lease extension, the tenant remained in possession of the premises on a month to month basis for eight years.

The business issue between the parties was, of course, money. The rent during the fifth extension term was $1,824.00/month (the rent for the original term was $1600.00/mo.). The tenant’s principal testified that around late 2003 or early 2004, he had a discussion with the landlord’s representative claiming that business was bad, and accordingly, the tenant would  have to reduce rent or move out. As a result of this discussion (according to the tenant), the monthly rent was reduced to $1,473.75/mo. but no written agreement was executed confirming the rent reduction. Tenant paid this amount for approximately eight years (from 2004-2012) and landlord accepted same without objection. While the exact termination date is in dispute, the tenant vacated the premises in November 2012, after the landlord stated the rent would need to increase by $1800/month (if tenant wanted to stay) because landlord had located a new tenant.  The tenant turned in its keys in the first part of December, 2013, but the landlord claimed it had no notice of the vacation of the premises until March, 2013.

Thereafter, the landlord sued the tenant claiming it was entitled to recover “(1) the difference between the $1,824 monthly rent specified in the fifth lease extension and the $1,473.75 month rent paid by tenant from January, 2011 through October, 2012 and (2) $1,824 in monthly rent for November 2012 through March 2013”, as limited by the court’s $15,000 jurisdictional limit. In response, the tenant asserted that it had paid all the rent due through October 2012 and that the security deposit covered the November 2012 rent.

In August, 2015, the trial court awarded the landlord $1,196.50 in damages, finding that: 1) the parties had orally agreed to reduce the monthly rent due under the lease to $1,473.75, 2) the landlord terminated the month-to-month tenancy as of October 31, 2012, and 3) the tenant vacated the premises on December 3, 2012 when it turned in the keys for the premises. Based on these findings, the court concluded that the tenant owed rent for the months of November and December 2012 (totaling $2,947.50) which, when offset by its $1,751 security deposit, resulted in a net damages award of $1,196.50 to the landlord.

Among the “assignments of error” (claimed mistakes by the trial court) claimed by the landlord at the Cuyahoga County Court of Appeals were: 1)  the trial court erred in upholding a verbal modification of a written lease, barred by the Statute of Frauds; and 2) the trial court erred in failing to enforce a no-oral-modification provision. As to the landlord’s argument that the parties’ oral agreement to reduce the rent was barred by the Statute of Frauds, the court did acknowledge that “a modification or reduction of the rent stated in a written lease cannot generally be proven by evidence of an oral agreement based on the Statute of Frauds.” In fact, the court in 3637 Green Rd. cited several cases subscribing to this general rule.

As with most case law, however, there are exceptions to the “general rule”. The principal exception to the Statute of Frauds is the equitable doctrine of “part performance” (which is not particular solely to leases). This doctrine basically dictates (based upon fairness/equity) that a lease (or other contract) should not be rendered unenforceable due to technical failures or oral modifications when much of the contract has been performed.

The 3637 Green Rd. court cited a number of cases that have established the following “test” to determine whether or not partial performance is sufficient to remove an agreement from the operation of the Statute of Frauds: 1) the performance “must consist of unequivocal acts by the party relying upon the agreement which are exclusively referable to the agreement”; and 2) the party asserting partial performance must have undertaken acts that “changed his position to his detriment which makes it impossible or impractical to place the parties in status quo.”

Applying the law to the facts, the 3637 Green Rd. court easily determined that eight years of lower rent payments without objection from the landlord were clearly “unequivocal acts”. Not only did the landlord not object, but in an October 17, 2012 financial statement attached to the landlord’s complaint, the landlord, in effect “stated” that  no additional amounts were due by virtue of showing a zero balance in tenant’s rent due account.

The landlord also argued that the lease itself  prohibited oral modifications. Section 24 of the lease states, in pertinent part: “No waiver of any … condition or covenant shall be valid unless it be in writing signed by Lessor,” and Section 42 of the lease provides, in pertinent part: “This Lease contains the entire agreement between the parties, and any other agreement hereafter made shall be ineffective to change, modify or discharge it … unless in writing and signed by the party against whom enforcement …. is sought.”

Clearly, the parties specified in the lease that modifications and waivers were not to be enforceable unless set forth in a signed writing. Additionally, there is a “boat load” of case law that provides if the language of a lease (or other contract) is clear and unambiguous, courts must enforce the instrument as written. So, case closed/trial court judgment overruled (in favor of the landlord); correct?

Not so fast. While the appellate court in 3637 Green Rd. did recognize the general law that provides, in effect that the written word, “rules”, it also recognized that there are exceptions to this basic principle of contract law as well. Citing precedent (prior case law on point), the court in 3637 Green Rd  summarized the law in this regard as follows: “If the language of a lease is clear and unambiguous, courts must enforce the instrument as written… However, waiver of a contract term can occur when a party conducts itself in a manner inconsistent with an intention to insist on that term… [and] a no-oral-modification clause can be waived by oral agreement like any other term in a contract.” The court of appeals in 3637 Green Rd. clarified, however, that the waiver must be “clear and unequivocal if it contradicts a written contract provision.” In other words, the same test to determine if partial performance is sufficient to remove an agreement from the operation of the Statute of Frauds can used to determine if a no-oral waiver provision can be waived by unwritten words/actions. According to the court, one could not be much clearer than payment of eight years of a reduced rent, without objection from a landlord, plus a landlord’s accounting entry showing a zero rent balance for the tenant.

While the court in 3637 Green Rd doesn’t present a bright line test as to what is clear and unequivocal, it did cite a couple of examples. One case cited on similar facts as 3637 Green Rd (EAC Properties, LLC v. Brightwell, 2011-Ohio-2373) involved a reduced rent being paid, without objection for thirteen months. Another case cited (200 West Apartments v. Foreman, 8th Dist. 1994 Ohio App. LEXIS 4081) wasn’t as much concerned with the duration of the waiver, but by the detrimental reliance of one party upon the waiver. In the 200 West Apartments case, the written lease was orally modified by the acts of the parties when landlord agreed to accept half the rent in exchange for services provided by tenant.

 3637 Green Rd. is a good example of a court applying principles of equity and fundamental fairness instead of the application of “black letter law” which would otherwise result in an unjust decision, As aptly explained by the 12^th District Court of Appeals of Ohio (in Fields Excavating, Inc. v. McWane, Inc., 2009-Ohio-5925) “if such [no oral modifications] clauses are rigidly enforced, then a party could simply insert the clause into an agreement and would be magically protected in the future no matter what that party said or did. More simply, by including a no-oral-modification clause in a contract, a party could orally induce the opposing party in any way and then hide behind the clause as a defense.”

As With Many Things in Life, Timing is Everything.

If I had to pick one issue that perpetually appears in term sheets and letters of intent negotiated by clients on real estate purchases, it is the issue of timing. In short, the self-imposed deadlines agreed to by the parties are often disconnected with reality.

Understandably, the seller in a real estate transaction wants to close as soon as possible, and the buyer may also be faced with pressures that dictate a tight deadline. However, there are certain realities that come into play and cannot, or should not, be ignored.

First, a buyer needs to allow adequate time to conduct a thorough diligence review of the property. In some counties, a title examination might be completed in a week, depending on the time of year, but more often than not, plan on at least two weeks. In certain counties it can take even longer, or if the title on a particular parcel or parcels is complicated more time will be required by the title agent. Timing for a survey depends on the type of survey. A mortgage location survey can be completed in the one to two week time frame and typically costs a few hundred dollars. While a location survey may be sufficient to remove the survey exception from the title policy, it doesn’t provide all of the information that an ALTA/NSPS survey covers. Also, most lenders, depending on the size of the mortgage loan, will require the more comprehensive ALTA/NSPS survey. This can take several weeks (more than 30 days) to be completed; particularly if being completed during a harsh winter.

All purchase agreements provide a limited time frame in which a buyer may object to information in the title report. If there is any likelihood that a survey will be completed as part of buyer’s due diligence, then buyer’s objection period should not start until buyer has received both the title report and the survey. It is more efficient to review these two items in tandem.

Environmental diligence is another key item that can slow down a deal. A Phase I environmental review can take 4-5 weeks as well. If the Phase I report identifies any significant issues that warrant testing or further review, then several more weeks will be required. Allow for extensions of the diligence period to complete this review if needed.

Second, if the purchase will involve financing, allow time for the lender to conduct its diligence and underwriting on the loan. In addition to title, survey and environmental, a lender will typically require an appraisal, zoning letters, and other financial and leasing information on the borrower and the property.  Appraisals can take a few weeks and zoning letters may not be quickly obtained depending on the responsiveness of the local government providing the letter. Keep in mind that an older property may be categorized as ‘legal, nonconforming’. This means the zoning has changed but the property is grandfathered and not held to the new zoning requirements. This often happens with older multi-family residential properties or older office buildings where local codes have changed requiring more parking spaces than were required when the building was constructed.

Additional work is needed in these situations to determine what will happen if there is a casualty that damages all or a substantial portion of the property.  In many instances the local municipal code (or the state statute, if the local government defers to Ohio law) allows a property to rebuilt along its same footprint and retain its ‘legal, nonconforming’ status so long as the property is rebuilt within certain time frames. It can be as short as 6 months or as long as 2 years. A lender will want to confirm what is or is not required in these situations (as should any prudent buyer) and may require the buyer to carry additional insurance to cover any changes in the zoning and building codes that would drastically impact the cost of rebuilding after a casualty.

Keeping all of the foregoing in mind, potential buyers should allow sufficient time in their purchase agreements so they do not have to go back to the seller and request (frequently at significant cost) extensions of time to close.  Third party providers and lenders are not bound by the deadlines in a purchase agreement and will take the time they require to properly complete their work. Acknowledging that reality can spares parties to an agreement a lot of heartburn.
_________________

There’s a New Form in Town (for Cuyahoga County Real Estate Transfers)

By: Stephen D. Richman, Esq., Senior Counsel at Kohrman, Jackson & Krantz

Actually, effective August 1, 2016, for Cuyahoga County, there is a new Page 2 to the statewide Real Property Conveyance Fee Statement of Value and Receipt (Form DTE 100). Form DTE 100 is the form that must accompany all real estate transfers in Ohio (unless exempt from conveyance fees pursuant to Ohio Revised Code Section 319.54 (G)(3)). Entitled the “Sales Verification Questionnaire”, this form must be signed and completed by either the seller or the buyer.  The Conveyance Fee Statement (the first page of Form DTE 100 is required to be completed/signed by the grantee or a representative of the grantee). By signing this questionnaire, the party completing same must acknowledge “that the information provided to the Cuyahoga County Fiscal Office regarding [the] real estate transfer is truthful and completed to the best of their knowledge.”

The newly revised Form DTE 100 can be obtained at the following site:

http://fiscalofficer.cuyahogacounty.us/pdf_fiscalofficer/en-US/DTE100RevAug2016.pdf

Basically, the Sales Verification Questionnaire (aka “new Page 2 of Form DTE 100) asks the following questions, extracted from the form:

1. Were there any special conditions affecting the sale?

O Sale between family members.

O Sale between two affiliated businesses.

O Auction Sale

O Forced Sale or Sheriff's Sale

O Sale involved a government agency or public utility.

O Buyer is a religious or charitable organization.

O Land contract or contract for deed.

O Sale involves only a partial interest.

O Sale includes trade or exchange of properties.

O Sale by judicial order

O NONE OF THE ABOVE

2. What was the use of the property at time of sale?

O Single Family Residence O Vacant Lot O Multifamily Residence O Retail O Apartment Building                                               O Industrial  O Other

3. Was property rented/leased at time of sale? O Yes O No

4. Did sale price include an existing business? O Yes O No

5. Was any personal property, such as furniture, equipment, machinery, livestock,

business inventory, included in the sale price? O Yes O No

If yes, describe:

Est. Value of Personal Prop. Incl. in Sale: $

6. Have there been any recent changes to the property?

 O No O Demolition

 O Addition(s) O Renovations

When was work completed?

Estimated Cost of Work Done: $

7. Does the buyer hold title to any adjoining property? O Yes O No

8. Was an appraisal done on the property? O Yes O No

9. Were any delinquent taxes assumed by the purchaser?

O No

O Yes – Amount: __________

10. How was the property marketed? (Check all that apply)

O Listed with Real Estate Agent O Displayed "For Sale" sign

O Advertised in Newspaper O Word of Mouth

-------------------------------------------------------------------------------------------------------------------------------------------------------------------

Why the need for this new form? The form itself answers this question; “All information obtained through this questionnaire will be used to determine whether or not this transaction is an arm’s-length, market based sale.”

What is an arm’s-length sale? In Ohio, relevant case law has established that “three factors are relevant to deciding whether a transaction occurred at arm’s-length: whether the sale was voluntary; i.e., without compulsion or duress, whether the sale [took] place in an open market, and whether the buyer and seller act[ed] in their own self-interest.”

Why does it matter if your transaction is an arm’s-length, market based sale? Basically, it has to do with establishing the value of real property which in turn determines the amount of real estate taxes required to be paid. The general rule with regard to determining value of real property (in order to calculate real estate taxes) is that the purchase price at a recent (within three years) arm’s-length sale of the property between a willing buyer and willing seller is usually dispositive. (Note that “usually” is italicized above because pursuant to Ohio Am. Sub H.B. 487 (H.B. 487) signed into law on June 11, 2012, the revised statutory language of R.C. 5713.03 now provides that an auditor may (vs. shall consider the price of a recent sale as value). Nevertheless, auditors usually consider the price of a recent, arm’s-length sale as value because what better indication of value is there than the price someone is willing to pay and actually pays for the property?

If not arm’s-length, however, auditors will usually not establish value based on the price. Examples of non-arm’s-length sales are: sales between family members, sale between two affiliated businesses, auction sales and other sales of the types described on the new Sale Verification Questionnaire.

Is this new questionnaire good or bad for taxpayers? While most of the information called for on the new form seems likely to result in increased valuations for the taxpayer, answers to questions 4 and 5 might help prove that valuation (and accordingly taxes) should be lowered.  

For example, if the purchase price of a $500,000 commercial property includes personal property valued at $100,000, the valuation of the real property should be $400,000. In such a case, however, consistency is the key. Appraisals are recommended to establish the value of significant personal property purchased along with real property, purchase agreements should specifically allocate the purchase price between real and personal property, and Section 7 (d)-(f) of the Real Property Conveyance Fee Statement (page one of Form DTE 100) should appropriately provide separate values for personal and real property, based upon the appraisal and agreed allocation.

Will the Sales Verification Questionnaire be required in other counties in Ohio? Good question. Counties researched thus far have not followed suit, but are expected to. I have posed this question to the Ohio Department of Taxation, and will supplement this article upon receipt of their answer.

Being a Charity Doesn't Mean You Qualify for the "Charitable Use" Property Tax Exemption in Ohio

When it comes to claiming a property tax exemption based on charitable use, merely owning the property in a 501(c)(3) nonprofit corporation is not sufficient to succeed.  On July 27, 2016, the Ohio Supreme Court issued its decision in Innkeeper Ministries, Inc. v. Testa, Slip Opinion No. 2016-Ohio-5104, in which it sided with the tax commissioner in denying Innkeeper Ministries, Inc. (Innkeeper) its tax exemption.

Innkeeper owns real property (over 71 acres) that includes two residential buildings and other recreational amenities, such as a swimming pool, basketball court, fishing ponds and a prayer walk through wooded property. Its stated mission is to provide a spiritual retreat for pastors, other church leaders and missionaries along with their spouses, which includes free meals and use of the amenities on the site.  A couple resides on the property, and act as caretakers.

While the caretakers advertise the services available at the property they had not succeeded in filling the rooms at any given time. Testimonials were provided on the mission of the organization and its use of the property, but no concrete evidence. What was missing from the record were financial information or documentation on the number of people served.

Innkeeper had applied for and was denied its property tax exemption by the tax commissioner. The Board of Tax Appeals overruled the tax commissioner, finding that Innkeeper’s “year round use of the subject property, in providing g a place of respite for the physical and spiritual renewal of Christian leaders, without charge [is] sufficiently charitable in nature to fall with the definition of charity set forth in Planned Parenthood [5 Ohio St.2d 117, 214 N.E.2d 222].”  The BTA concluded that Innkeeper used its property “in furtherance of or incidental to its charitable …purposes and not with the view to profit” within the meaning of R.C. 5709.121(A)(2).

Ohio law provides a specific tax exemption for church retreats but Innkeeper’s property does not qualify. It is not owned by a church and is subject to substantial residential use by the caretakers.  R.C. 5709.121, which contains an expanded definition of “exclusive charitable use”, residential use doesn’t defeat the exemption so long as such use is purely incidental to the charitable purposes of the property owner. However, the underlying issue is what the property owner qualifies as a “charitable institution” under that statute. In the instant case, this would require Innkeeper to show that its use of the property at issue, which is its only activity, can qualify as charitable.

The Ohio Supreme Court found that given the residential use of Innkeeper’s property, the BTA erred in not also requiring proof of the primacy of Innkeeper’s charitable hospitality.  It held that Innkeeper had the burden of proof to demonstrate that the hospitality it extended to others was primary over the personal, familial and residential use it made of the property. While the property was owned by a 501(c)(3) entity, the caretakers controlled that entity. As the court pointed out, “…the accommodation of guests at no cost in a spacious residence cannot by itself turn the residence into a charity.”

While Innkeeper provided some evidence that it advertised for guests in accordance with its mission, as stated earlier, it did not provide any other documentation. Useful documentation, which one would expect from any 501(c)(3), would have included how many responded to the advertisement, how many stayed at the property each year, how many were turned down, etc.

As evidenced by the court’s decision against Innkeeper, the use of a property by a 501(c)(3) entity as a residence without quantitative evidence of its use in connection with its stated charitable mission defeats a claim for property tax exemption in Ohio.

Is it a Lease or a License?

By: Stephen D. Richman, Esq., Senior Counsel at Kohrman, Jackson & Krantz

It’s a license, it’s a lease, it’s a license and a lease. Actually, while Faye Dunaway’s character in the movie Chinatown could be both mother and sister to “Katherine”, a transferred right regarding real estate cannot be both a license and a lease.

So, is a kiosk at a shopping mall, for example, a license, or a lease? How about the use of a building roof for a billboard; license or lease? Does it really matter what you call it? Is this the case of a distinction without a difference?

Although the terms are often used interchangeably, in Ohio (and most other jurisdictions) there is a distinct difference. As aptly summarized by the Eighth District of Ohio Court of Appeals in Bewigged By Suzzi, Inc., Appellant, v. Atlantic Dept. Stores, Inc., et al., Appellees, 1976 Ohio App. LEXIS 5803, “The major difference between a license and a lease is a license to do an act upon land involves exclusive occupation of the land by the licensee [only] so far as is necessary to do the act and no further, whereas a lease gives the right of possession of the land and the exclusive occupation of it for all [emphasis provided] purposes not prohibited by its terms. A further distinguishing feature is the difference in the expected duration of a tenancy as opposed to a license. In dealing with a leasehold estate, the estate will be initially terminable only upon the expiration of a specific period of time, unless the parties specifically make an agreement to the contrary. The rule is exactly the opposite in licenses. A license is terminable at will unless the parties specifically provide to the contrary and the licensee holds a license coupled with an interest.”

The difference between license and lease definitely mattered to Tower Place Mall and its property manager in Schloss v. Sachs, 63 Ohio Misc. LEXIS 76 (Ohio Muni. Court, 1993).

In this case, Suzanne Schloss sued the mall’s managing agent (Mr. Sachs) claiming breach of an oral license agreement whereby Sachs allegedly promised to pay one-half of the construction costs of a kiosk that Schloss would build and operate for six months at the mall. Mr. Sachs filed a motion to dismiss, claiming that if there was a verbal agreement, it was a verbal lease, not a license, and since leases of commercial real estate must be in writing to be enforceable, the plaintiff was entitled to no relief whatsoever.

Applying case law and the facts, the court in Schloss basically reasoned that the kiosk use would constitute exclusive use of a small, but distinct part of the mall, and therefore, the use would be characterized as a lease vs a license. The court contrasted these facts with those of a coffee truck vendor who has a license to sell its coffee/food at various places within a property but not, at a specific, exclusive spot for a definite term. Once the court in Schloss established that a lease was created, the plaintiff’s action was summarily dismissed because pursuant to Ohio law (and most other jurisdictions via the “Statute of Frauds”), leases of commercial real estate must be in writing to be enforceable.

The difference between license and lease also mattered to Atlantic Department Stores; the defendant-appellee in the Bewigged By Suzzi case cited above. In this case, the agreement in question gave the appellee-plaintiff the right to establish a wig department in various stores owned by Atlantic. For a couple of years after the stated expiration of the agreement, the wig departments remained and the wig company paid Atlantic based on previous amounts due. In November of 1973, Atlantic seized the wig company’s inventory and removed same from its stores. While the court of appeals in Bewigged reversed the trial court decision and held that the seizure of the goods was wrongful, the wig company wanted the court to apply landlord-tenant “holdover case law” to its case, in effect holding the agreement to be a lease vs a license.

Ohio “holdover law” provides (unless lease language specifically states otherwise) that a tenant holding over past its lease expiration, and paying rent as and when previously paid is deemed to have entered into a new, periodic tenancy based upon how frequently its rent is paid. So, for example, if a tenant paying rent annually, holds over its one year lease, and makes a new annual payment at the beginning of year two, (and same is accepted by the landlord), the lease would be deemed extended for one year. If a tenant holds over after such one year lease, and rent is paid monthly, the tenant’s subsequent payment of monthly rent would establish a new, month to month periodic lease.

The court of appeals in Bewigged easily came to the conclusion that a holdover situation was not in effect because the agreement in question was not a lease, but a license. The court reasoned that while the agreement provided certain square footage requirements for the wig departments, it did not specify specific, exclusive areas of the stores to be used for the sale of wigs. Also, the wig company had other rights with respect to the space, other than to sell wigs. The court also found it easy to refuse to create a “holdover license” rule. The court explained that the very nature of a license is such that it is opposite to that of a lease with regard to term. A license is terminable at will unless the parties specifically provide to the contrary. Leases, on the other hand are typically for fixed terms.

As the aforesaid cases demonstrate, it matters greatly, whether or not a right with regard to property is designated a license or a lease. As Ms. Schloss unfortunately discovered, an aggrieved party will not be able to enforce, in a court of law, an unwritten commercial lease. Verbal licenses, on the other hand are enforceable. As the owner of the wig company in “Bewigged” learned (the hard way), there is no “holdover license law”. Only a lease holdover can result in a new, periodic tenancy.

So what is the moral of this story? Just say “license” when you want a license” and say “lease” when you want a lease? If only it were that easy. As the United States District Court for the Eastern District of California aptly explained in United States of America v. Southern California Edison Company, 2004 U.S. Dist. LEXIS 4545, “Even where a writing exists which categorizes the agreement concerning the property as either a lease, easement or license, that categorization will not control the determination, although the courts will consider the title and language of the document used in deciding the nature of the interest at stake. Generally, courts look to the intent of the parties concerning the property to determine whether the agreement should be interpreted to create a lease, easement or license.”

In synthesizing Ohio cases, the “the key fact in determining whether an agreement constitutes a license or a lease is whether the lessee/licensee has exclusive possession and the power to exclude  the lessor/licensor from a specific area.” (Schloss, HN4). This rule seems to have been correctly applied in the above-mentioned cases. The owner of the wig company in Bewigged had a license because she only had the right to a wig department at several stores, not the wig department at specific locations within such stores. The right to use the kiosk in Schloss was held to be a lease because the kiosk was assigned a specific space, and the landlord could not do anything else with that space. Of course, a kiosk on a different set of facts might be held to be a license vs. a lease. Such was the case with a recent decision in Connecticut.

If the above sounds convoluted, without a “bright line test” to work in all situations, it is. Even the United States District Court in the Southern California Edison Company case admitted that “Distinguishing between a lease, an easement and a license concerning the use of real property can be complicated.” At least we know that a property right can’t be a license and a lease…at least until a judge holds that a “leasance” was created on the facts of a particular case in the future.