Court of Appeal affirms judgment for GMSR’s client, ordering enforcement of its Beverly Hills ground lease through 2102

In 2003, GMSR’s client purchased the ground lease of a prime Beverly Hills commercial property.  The lease was set to expire in 2058, but after a few years the landlord agreed to extend it through 2123, in return for a $1.5 million up-front payment.

Ten years later, the landlord sued GMSR’s client and invoked California Civil Code section 718, which invalidates city lot leases longer than 99 years.  The landlord sought to cancel the entire lease as illegal, or at least cancel the extension agreement.  In a bench trial, the trial court ordered enforcement of the lease through 2102.  Rejecting the landlord’s position, it found that the 2003 purchase constituted a lease novation that restarted section 718’s 99-year limit.  The court therefore shortened the lease by just 21 years and ordered the landlord to return a pro rata portion of the $1.5 million payment as restitution.

In a published opinion, the Court of Appeal addressed the history of lease term limitations in California, predecessor limitations in New York, and similar limits in English common law.  The court unanimously affirmed the rulings enforcing the lease through 2102 and awarding restitution.  The court also agreed with GMSR’s argument that the trial court had authority to award interest on the restitution award and reversed its contrary order.

To read the Court of Appeal Opinion, click here:  Tufeld Corporation v. Beverly Hills Gateway, L.P. (2022) 86 Cal.App.5th 12 [Second District, Division Five].