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Mikulas Investments LLC. v. Colonial Management Group LP

United States District Court, D. Colorado

August 28, 2017

MIKULAS INVESTMENTS LLC., Plaintiff,
v.
COLONIAL MANAGEMENT GROUP LP, Defendant.

          ORDER GRANTING SUMMARY JUDGMENT

          RICHARD P. MATSCH, SENIOR JUDGE

         The plaintiff Mikulas Investments, LLC, (Landlord) owns a commercial building in Monument, Colorado, which it leased to defendant, Colonial Management Group L.P. (Tenant) on January 27, 2015. In this civil action brought pursuant to 28 U.S.C. § 1332, Landlord claims that Tenant breached the lease by failing to restore the property to the same condition and layout as existed when it was given possession.

The relevant provisions of the lease are these:
6.02 Proper Zoning: LANDLORD warrants and represents, to the best of its knowledge and belief, that no zoning or other restriction exists preventing or restricting use of the Premises for Tenant's Use. TENANT hereby confirms that they have obtained from the Town of Monument in El Paso County a letter indicating that the Premises is properly zoned for Tenant's Use (“Tenant's Zoning Letter”) and shall furnish such letter to LANDLORD, but TENANT reserves all rights to terminate pursuant to Article 25.
ARTICLE 10 - FIXTURES
10.02 Removal of TENANT's Property. Upon expiration of this Lease, or any earlier termination hereof, TENANT, at its expense, shall remove from the Premises all of TENANT'S Property, and TENANT shall repair any damage to the Premises resulting from any installation and/or removal of TENANT'S Property, and shall restore the Premises to the same physical condition and layout as they existed at the time TENANT was given possession of the Premises, reasonable wear and tear excepted. TENANT shall have five (5) days after the expiration or termination of the Lease to complete such tasks with a license to enter the Premises. Any other items of TENANT'S Property which shall remain in the Premises, or after such period of five (5) days, may, at the option of LANDLORD, be deemed to have been abandoned, and in such case, such items may be retained by LANDLORD.
ARTICLE 25 - OPTION TO TERMINATE

25.01 Contingent on Licenses and Permits. In the event that: (i) TENANT is unable to maintain in full force and effect any and all necessary local, County, State and federal permits licenses and approvals for the operation of TENANT's Use during the Term or any Option Term, or (ii) Tenant fails to receive TENANT's Zoning Letter after TENANT may request same, then TENANT shall have the right, at TENANT's option, upon notifying the LANDLORD in writing to terminate the Lease as set forth in Article 25.02. TENANT will use its best efforts to keep all licenses, permits and approvals as described in Article 25.02.

25.02 Termination of Licenses or Permits Lost. The LANDLORD and the TENANT agree that the continuing obligations of the TENANT to be bound by the terms of this Lease is expressly contingent upon the TENANT maintaining in full force and effect any and all necessary local, County, State and federal approvals, licenses and permits for the operation of TENANT's Use during the entire term of the Lease and any renewals term. In the event that (i) the TENANT shall lose any such approvals, licenses and/or permits, for any reason whatsoever; or (ii) any event described in Article 25.0l may occur, then the TENANT shall notify the LANDLORD and the lease agreement shall terminate within 120 days of the date of notification. The TENANT shall be responsible for all lease payments and expenses during the 120 day period. At the end of this period, the Lease agreement shall become null and void and all obligations of TENANT under the Lease shall be terminated. Lease Agreement (Doc. 24-3) (bold added).

         The defendant has moved for summary judgment of dismissal.

         The following statement of facts is not disputed.

         Landlord acquired the subject property in 1998. Until 2014 it was used primarily by a pediatric clinic or medical group.

         Tenant operates outpatient substance abuse clinics in nineteen states. In 2014 the State of Colorado requested Tenant to consider locating a treatment clinic in the Monument area. Tenant identified the property as a potential location and began negotiations with Landlord. On October 2, 2014, the Town of Monument issued to Tenant a Zoning Use Conformation providing that the planned clinic was an approved use in the Town's business district.

         Tenant invested in modifications of the building to make it suitable for its purposes, including installation of a security system, new doors and windows, plumbing, HVAC, electrical and “other finishes.”

         After these improvements had been made, but before the clinic opened, public opposition to the clinic was mobilized by citizens of Monument. On June 25, 2015, an appeal of the previously granted zoning approval was filed with the Town's Board of Adjustment. After a public hearing on August 10, 2015, the Town revoked its approval to operate a clinic at the property.

         As a result, Tenant was unable to open or operate its planned clinic. On April 29, 2016, Tenant gave notice to Landlord of its intent to terminate the Lease pursuant to Article 25. Tenant never occupied the property and the improvements ...


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