Landlord/Tenant – Billboard Lease –Improvement Removal –First Impression –All or None – Holdover Rent –Reasonable Time

Fairway Outdoor Advertising v. Edwards. (Lawyers Weekly No. 09-07-0595, 16 pp.) (Donna S. Stroud, J.) Appealed from Cabarrus County Superior Court. (W. Erwin Spainhour, J.) N.C. App.
Holding: When a lease grants the lessee the right to remove “all structures, equipment and materials” but does not require the lessee to remove all of them or to restore the property to the same condition as at the beginning of the lease, the lessor may not require the lessee to choose between removing all or removing none.
Judgment for the plaintiff-lessee affirmed.
Facts
On Nov. 21, 2001, plaintiff leased a billboard site from defendants’ predecessors for five years at $1,500 per year. The lease contemplated a five-year extension after renegotiations.
Plaintiff and defendants were unable to agree on the five-year extension. Defendants notified plaintiff on Oct. 20, 2006 that it had until the end of November to completely remove its billboard and return the parking lot pavement to its original condition.
On Dec. 1, 2006, plaintiff filed a declaratory judgment action, seeking declarations of (1) its right to maintain its billboard on defendants’ property until Nov. 30, 2011, and (2) the rent it should pay. The trial court entered a preliminary injunction in favor of plaintiff but ultimately ruled in favor of defendants on Sept. 27, 2007.
On Oct. 12, 2007, plaintiff’s employees went to remove the billboard, but defendants denied them access. On Oct. 26, 2007, plaintiff filed this lawsuit alleging conversion and breach of lease. The trial court entered a temporary restraining order barring defendants from denying access to the billboard.
The trial court granted summary judgment for plaintiff, and defendants appeal.
Reasonable Rental
Defendants filed a counterclaim they labeled as unjust enrichment; however, the substance of the counterclaim is an action to recover reasonable compensation from a holdover tenant, and we will treat it as such.
Plaintiff presented no evidence of the reasonable rental value of the property. Defendants presented only evidence of plaintiff’s gross income from the use of the property. We hold that evidence of a lessee’s gross income from the use of a leased property, standing alone, is not evidence of reasonable rental value because it does not take into account the lessee’s other expenses in generating that income. Nothing else appearing, therefore, the negotiated rental rate is presumed to be fair compensation for use of the property.
Defendants accepted $1,500 in rental payment on March 15, 2007. This transaction further strengthens the presumption that the negotiated rental rate was equal to the reasonable rental value of the property. Defendant’s counterclaim is without merit.
Time for Removal
The lease granted plaintiff the right to remove all structures, equipment and materials from the leased premises within a reasonable period of time after the expiration of the lease. Under N.C. law, when a billboard is not removed within a reasonable time after expiration of a lease, the billboard is deemed abandoned and the lessee no longer has a right to it.
Diligent prosecution of related non-frivolous litigation should be taken into account in determining whether a party’s time for action has passed.
Plaintiff brought a declaratory judgment action the day after the lease expired. The action was not frivolous; the trial court entered a preliminary injunction in favor of plaintiff because it concluded that plaintiff was likely to succeed on the merits.
Plaintiff attempted to remove the sign two weeks after the declaratory judgment action was ultimately decided in defendants’ favor, but defendants blocked plaintiff’s access. Two weeks after defendants blocked plaintiff from removing the sign, plaintiff filed the current action. This action was not frivolous.
On these undisputed facts, plaintiff has not yet exhausted the reasonable time allowed for removal of the sign and therefore has not abandoned it to defendants. This is especially true where, as here, the lessor specifically forbade the lessee from entering its property after expiration of the lease.
Extent of Removal
Defendants argue plaintiff must remove all of the billboard including its underground foundation or none of it. This is an issue of first impression in North Carolina.
The greater weight of authority in other jurisdictions favors plaintiff: “Where the tenant is given the right to make improvements and remove them during the term, the right to remove includes the right to cause such damage to the freehold as such removal will naturally cause, and the tenant is liable only for such damages as are unnecessarily or wantonly caused by him.” 52A C.J.S. Landlord and Tenant Sect. 884 (2003).
Generally, a tenant who has made alterations in the premises does not have to restore the property to its original condition where the lease does not specifically require such action. Furthermore, as a general rule, in the absence of an express provision in the lease, where the lessee elects to remove one particular alteration this does not obligate him to remove all alterations and return the premises to their pre-lease condition.
Thus, the general rule is that, in absence of a specific lease provision directing otherwise, a tenant has the right, but not the obligation, to restore the leased property to its original condition. The lease in this case does not contain any provision which creates an obligation for plaintiff to remove its sign or foundation but only granted the right for plaintiff to remove its “structures, equipment and materials” within a reasonable time.
No meaning, terms or conditions can be implied in a contract which are inconsistent with the expressed provisions.
We hold that when, as here, a lease grants the lessee the right to remove “all structures, equipment and materials, but does not require the lessee to remove all of them or to restore the property to the same condition as at the beginning of the lease, the lessor may not require the lessee to choose between removing all or removing none.
Affirmed.