JUNE 1999

Recently, Watson & Speight, P.A. has been in local news. Kent Speight and Jennifer Lappegaard obtained a restraining order halting the demolition of the Young Adults Association (“YAA”) Clubhouse. There were several significant legal, constitutional and social issues at stake. Here’s the real story you weren’t told. LEGAL ISSUES. You all know that, if you are a tenant renting an apartment on a month-to-month basis, you or your landlord can terminate the lease by giving one month’s notice. However, if you rent property for a longer period of time, say a period of several years, neither the landlord nor the tenant can terminate the lease until the term of the lease expires unless (a) the tenant defaults and a court orders the tenant to be evicted, (b) the property is condemned, or (c) the parties voluntarily agree to terminate the lease. In this instance, the YAA had 3 ½ years left on a 10 year lease. The term of the lease was not to expire until December 1, 2002. The Red Wing Port Authority purchased the property subject to the lease. The YAA was not in default. Therefore, the only ways to evict the YAA were to condemn the property or to negotiate a voluntary termination of the lease. The Port Authority did neither. We met with the Port Authority in January to discuss termination of the lease. The Port Authority did not meet with us again until April 30, 1999. In the interim, no offer to settle the lease termination issue was made. The contractor started demolishing the building April 21, 1999. Thus, it was not until after the building was being demolished that the Port Authority attempted to negotiate a termination of the lease. Nonetheless, the Port Authority gave the YAA several notices to vacate the property, even though the lease had not been terminated. As a result, we believed that the Port Authority was attempting to illegally evict the YAA.

CONSTITUTIONAL ISSUE. The Federal and State Constitutions provide that your property cannot be taken without just compensation. You know that your real estate – your home or business – cannot be taken without compensation. Minnesota law also provides that a tenant’s interest in a lease is an interest in real estate that cannot be taken without compensation. Minnesota law says that a tenant should be paid the difference between fair market rent and the rent that the tenant is actually paying. We did some research and were told by County officials that fair market rent in the downtown area is $10-$20 per square foot. We asked for lease termination damages based on $5 per square foot rental value. We ultimately settled for far less than $5 per square foot rental value.

THE COURT DECISION. The YAA was informed by the City Attorney that the building would be completely demolished on May 10, 1999. When negotiations proved fruitless, the YAA sought a temporary restraining order halting demolition. The Court agreed with the YAA. The Court held that the YAA had a constitutional right to compensation and that the City and the Port Authority could not terminate the lease without first negotiating a just amount for damages. The court held that the lease had not been terminated and the YAA had the right to occupy the property for 3 1/2 years. The court held that the YAA was likely to succeed at trial. The Judge wrote, “Public policy is implicated in this matter. The Port Authority is a governmental agency and taking private property without just compensation violates the Constitution. It is in the public’s best interest to restrain this type of intrusive action upon private citizens without strictly following applicable law.”

SOCIAL ISSUE. The most frustrating aspect of this matter relates to the social and political implications at stake in the proceedings. The Director of the Port Authority has stated that the Port Authority acknowledged that it owed the YAA compensation for lease termination damages. However, the City and the Port Authority did not offer to pay lease termination damages until after demolition had already started. Prior to April 30, 1999, we were told by the Port Authority’s attorneys that the YAA would get nothing. Worse, it seemed as though the City and the Port Authority tried to do everything but pay damages. Last fall, after informing the Port Authority’s relocation specialist that we believed that the YAA was entitled to lease termination damages, we received a call from someone in the Port Authority office informing us that the annual program support payments to the YAA would be cut off if the YAA asked for compensation. After that we were informed by several other City officials that the YAA would lose its funding from the City if it asked for lease termination damages. Federal law prohibits the government from punishing its citizens for exercising their constitutional rights. Yet, this seemed to be a clear attempt to keep the YAA from exercising its constitutional and contractual rights to damages for premature termination of its lease.

A series of Strategic Plan Community Meetings will be held to inform citizens about the City’s shrinking/shifting tax base. The information gathered at these meeting will help the Red Wing City Council decide how much the City’s portion of your property tax bill will increase and the level of City services provided into the next century. Plan to attend and have your voice heard.

The June 1999 special edition of the Red Wing’s Current has important background information about the financial future of Red Wing. For more information contact Brian Peterson at 385-3617 or Lynda Woulfe at 385-3611.

LAW FIRM FAMILY GROWS

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The opinions and ideas expressed herein do not constitute legal advice and should not be relied upon as such.  If you have a specific legal problem, please consult a lawyer.

Copyright © 1999 Watson & Speight, P.A. . All rights reserved.
Revised: June 22, 2002