Merino Yebri LLP

Laundry Lease Pitfalls To Avoid

 
  Merino Yebri, LLP
1925 Century Park East, Suite 2140
Los Angeles, CA 90067
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By Sam S. Yebri, Esq.
June  14,  2013

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Fine print in laundry room leases often come back years later to haunt property owners. Owners, purchasers, and managers of multi-family properties complain most frequently about right of first refusal provisions in their laundry leases. They generally fail to consider these onerous provisions until a dispute arises threatening their ability to get better service from a new provider. However, owners have several weapons in their legal arsenal to get out of an existing lease that contains a right of first refusal provision.

Right  of  First  Refusal
A right of first refusal provision typically provides that if the owner desires to lease the laundry room to another laundry service, the existing company has the right to match any bona fide offer from the proposed new company. Such a provision is completely one-sided because it benefits only the existing company. While the existing company will often strive vigorously to enforce this provision, the owner is able to fight back and avoid its oppressive consequences.

Month-­to-­Month  Lease
First, the owner could ask the new company to propose a month-to-month lease. If the competitor delivers a month-to-month lease, the current provider has the option to match it. Even if the current provider agrees to match the month-to-month lease, the owner would be able to change providers after the first month. In attempting to enforce its one-sided right of first refusal, service providers often take the position that such month-to-month laundry leases are not enforceable. However, there is no clear authority in California law that deems a month-to-month lease commercially invalid or unenforceable.

Rental Agreement
Second, the owner could ask the new company to propose a washer/dryer rental agreement. Such an agreement would lease the laundry equipment to the owner, rather than a customary lease agreement under which the owner leases the laundry room to the service provider. As such, the washer/dryer rental agreement would actually be a license and the right of first refusal would not apply to it because it is not technically a “real property lease.” For example, standard right of first refusal provisions in laundry leases generally provide that “upon termination of this lease, Lessee [the company] shall have the right of first refusal to meet any bona fide offer to lease said premises made by any other person or entity similarly engaged in the operation of laundry equipment, under identical terms and conditions of that offer.”

In  Conclusion
In sum, an owner may deliver to the existing company a proposed month-to-month lease from a competitor and require that the company either match it or enter into a so-called license agreement to which the right of first refusal would not apply. Our Firm’s clients have effectively used these strategies with our help to negotiate out of onerous laundry leases on favorable terms.

Of course, the best way to avoid these problems is to carefully review the fine print in the preprinted laundry leases with an attorney before signing them. Many provisions are negotiable, including the duration of the lease tem (often five to ten years), the right of first refusal, and the automatic renewal provisions. Please contact Merino Yebri LLP to help protect your rights in connection with laundry leases.

This article is provided for general informational and general purposes only. It is not offered as and does not constitute legal advice or legal opinions. Nor is it a solicitation or intended to create an attorney-client relationship. You should not act or rely on any information contained in this article without first seeking the advice of an attorney. For a consultation about laundry leases, please contact us or call our office at (310) 551-2000.


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