COA affirms, reverses, remands in broken lease case

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A Court of Appeals of Indiana opinion in a case involving the breaking of a lease split three ways Monday, with the appellate court affirming in part, reversing and remanding the case back to a lower court.

The case involved Low Cost Spay-Neuter Clinic Inc., a not-for-profit corporation that provides low-cost veterinary services at multiple locations in central Indiana, and Lafayette Rentals Inc., with each party accusing the other of breaching a lease agreement.

In 2018, the city of Lafayette, the city of West Lafayette and Tippecanoe County invited Low Cost to open a Lafayette location and, to entice the corporation to open that location, offered to pay its rent for its first three years of operation. Low Cost agreed to open a Lafayette location, and it leased space in a strip mall owned by Lafayette Rentals.

The lease term ran from Nov. 4, 2018, through Dec. 31, 2023.

Low Cost invested approximately $553,000 into renovating and equipping the leased space, and the Lafayette location opened for customers on Feb. 9, 2019.

According to the appellate court, Low Cost periodically sent Lafayette Rentals emails seeking resolution of various issues related to maintenance of the property.

That included on July 22, 2020, when Low Cost sent Lafayette Rentals a letter noting various building defects, including roof leaks, exterior window leaks, issues with the building’s heating, ventilation and air conditioning system, and unsightly common areas. The corporation requested that Lafayette Rentals make repairs to address the problems.

On June 3, 2021, Lafayette Rentals sent a letter to Tammy Sollenberger, Low Cost’s executive director, alleging the corporation had breached the rental agreement by receiving deliveries in the front of the building, not using “” to submit payments electronically, failing to pay common area maintenance costs and failing to properly maintain the HVAC system.

The issues eventually proceeded to litigation in the Tippecanoe Superior Court, with Lafayette Rentals ultimately appealing the trial court’s judgment following a bench trial in its suit against Low Cost.

In that lawsuit, each party alleged the other party breached a lease agreement.

The trial court denied Lafayette Rentals’ request to terminate the lease, but it did grant the company’s counterclaim with respect to the designated parking of the van and other minor breaches.

The trial court then entered judgment in favor of Lafayette Rentlas on its counterclaim for $1.00.

Cross-appealing, the parties raised three issues, which the appellate court addressed:

  1. Whether the trial court erred when it found Low Cost did not default on its lease by failing to timely pay its rent.
  2. Whether the trial court erred when it ordered Lafayette Rentals to replace the exterior HVAC system if the system failed.
  3. Whether the trial court erred when it awarded Lafayette Rentals $2,000 of the $11,325 that it sought in attorney fees and when it did not award attorney fees to the clinic.

Addressing the first issue, Judge Melissa May said the trial court did not err in finding Low Cost was not in default for failure to pay rent in July 2022 because the lower count discredited testimony that the clinic “was habitually late in paying rent … .”

“Moreover, the trial court did not err in concluding LR Inc. was responsible for maintenance and/or replacement of the exterior portions of the HVAC system because the lease agreement defined the Leased Premises as 6,000 square feet of interior space,” May wrote. “However, the trial court did abuse its discretion in failing to award the Clinic (Low Cost) attorney fees and in awarding LR Inc. attorney fees.”

Pursuant to the terms of the lease agreement, Low Cost was entitled to attorney fees as the prevailing party, May wrote. Thus, the appellate court reversed the award of attorney fees to Lafayette Rentals and remanded for the trial court to award attorney fees to Low Cost.

Judge Paul Mathias and Judge Cale Bradford concurred.

The case is Lafayette Rentals, Inc. v. Low Cost Spay-Neuter Clinic, Inc., 22A-PL-362.

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