The parent company of Clark’s Market is suing its Aspen landlord, alleging that more than $800,000 in rental fees over a four-year period were improperly charged to the grocer.
Aspen Grocery Inc., which does business as Clark’s Market Aspen, contends that Aspen M&W Properties charged for capital improvements that were outside the scope of the parties’ lease. M&W refuses or is “unable to account for” $1.5 million in common area maintenance (CAM) charges to commercial tenants in the Puppy Smith Building, the lawsuit says.
Clark’s, which has been in Aspen since 1978, signed a long-term lease with Puppy Smith LLC in 1999 for the 19,520-square-foot space it occupies. The lawsuit, filed Friday in Pitkin County District Court, lists M&W and Puppy Smith LLC as defendants, and says Puppy Smith LLC is an “alter ego” of M&W.
M&W finances Puppy Smith LLC and owns a majority of its interests, and they share principals and commingle funds and assets, wrote Aspen Grocery’s attorney, Peter Thomas of Aspen.
The lease calls for Clark’s Market to pay a monthly CAM charge in an amount representing its estimated proportional share of the costs of operation and maintenance of the building. The CAM charge, according to the lease, was to be computed “based on the ratio of the gross floor area of the leased premises to the gross leasable square footage of the commercial units in the building,” Thomas wrote.
Aspen landlords have long had CAM clauses in leases, said Bob Langley, a commercial real estate broker with Joshua and Co. who is not a party to the lawsuit.
He said most commercial leases in town are of the “triple net” type, meaning the tenant is responsible for paying the landlord’s insurance, maintenance and taxes on the building.
These obligations for renters arose after property owners realized “tenants are motivated to get the space,” Langley said.
Asked if disputes over CAM charges are common, Langley said, “They shouldn’t be because [such obligations] should be spelled out in the lease.”
The Clark’s Market lease says the grocer is not responsible “for the repair of more than 20 percent of the roof, parking lot, plumbing, heating, electrical or sewer, in any calendar year,” the lawsuit says.
Among the allegedly improper charges assessed to Clark’s, which have been paid, Thomas wrote, are:
• M&W charging more than $104,000 for the repair or replacement of more than 20 percent of the Puppy Smith Building’s roof in 2006 and 2007;
• $43,141 in 2007 for new floors in the basement that houses Alpine Ace Hardware “which is a capital improvement under the lease”;
• $115,751 to resurface and restripe the parking lot in 2011, a project that also exceeded 20 percent of the lot and should also have been considered a capital improvement.
M&W principal Tony Mazza was out of the country Friday, said a woman answering the phone at his office. She said she was unaware of the lawsuit and declined further comment.
“Clark’s Market reasonably trusted that the CAM summary statements were accurate and had no basis or reason, from the information provided, to challenge defendants’ annual ‘reconciliation’ of [CAM] charges,” the lawsuit says.
But in January, after M&W allegedly failed to produce any CAM statements from 2008 to 2011, Clark’s representatives began requesting “a reconciliation of all [CAM] charges for the missing years, together with all supporting documentation,” Thomas wrote. “Defendants failed or refused to produce the requested reconciliation.”
The requests for financial documents continued, in vain, through July, according to the lawsuit.
On July 12, M&W allegedly said it had converted “to a new accounting system and that it therefore would not be possible for defendants to produce the requested general ledger statements,” the suit says.
Later that month, however, M&W and Puppy Smith LLC allegedly produced partial general ledger documents. The statements indicate “that most if not all of the requested data and reports which they had refused to provide Clark’s Market, and which they had represented did not exist, had in truth been in defendants’ possession all along,” Thomas wrote.
Clark’s contends that M&W violated its fiduciary duties and breached the contractual provisions “from the beginning by falsely or negligently accounting for [CAM] charges over the years.”
The lawsuit contains six claims, including breaches of contract, fiduciary duty and of covenant of good faith and fair dealing.