Marina Aviation, LLC v. City of Marina, California – No. 16-21-12

Author:

Kevin C. Willis, Director, Office of Airport Compliance and Management Analysis

Complainant(s):

Respondent(s):

Airport(s):

Marina Municipal Airport (OAR)

Holding:

Abstract:

Complainant alleged that the City violated Grant Assurance 22 by refusing to negotiate and offer a lease extension; that another tenant was provided with a 10-year lease extension, with its economic benefits, “and thereby the City permitted this tenant to enjoy a more favorable position regarding the term extension with the City than Marina Aviation, LLC.” (p. 6.)

In its Motion to Dismiss and/or for Summary Judgment, the City asserted that its rejection of Complainant’s request to extend the Ground Lease did not, and could not, constitute unjust discrimination because of Complainant’s continuing default and failure to perform under the Ground Lease and the Repayment Agreement. (p. 6.) The City further explained that “the Airport conducted a comprehensive lease/rent review of all of its Airport tenants and determined that [Complainant] did not pay all sums due in accordance with the terms of the Ground Lease.” (p. 6.) Complainant’s “missed rental payments and resulting late fees and interest continued to accrue and resulted in the amount of $95,224 being past due and owing to the City.” (p. 6.) Thus, while the City Council contended that it considered in good faith a lease extension request, it declined based, in part, on Complainant’s poor past performance and continuing default under the Ground Lease. (p. 6.) What is more, the City raised the point that after termination of the lease, Complainant’s Managing Member continued to collect rent from his former tenants, potentially in violation of California criminal law, which prohibits a person from fraudulently renting out property by another and receiving rent under false pretenses. (p. 7.)

In the foregoing context, the Director found that “the City has not violated Grant Assurance 22 by denying Marina a lease extension due to difficulties collecting rent payments owing over a multi-year period.” (p. 7.) “A sponsor is under no obligation to continue a business relationship with a tenant if the tenant is not meeting its obligations under the terms of a lease agreement. Not adhering to minimum standards or not paying rent are reasonable bases for a finding of default.” (p. 8.) “Here Marina admits that it held back some ground lease payments, which supports the City’s actions not to extend the lease agreement.” (p. 8.)

The Director also rejected Complainant’s allegations under Grant Assurance 23, Exclusive Rights, noting that “the record clearly shows that Marina lost the potential for a lease extension due to its failure to pay lease rates on a timely basis. Evidence presented shows that the parties agreed to a Repayment Agreement for past due finds. Additionally, the City submitted a running ledger for Marina … [showing] that Marina remains substantially in arrears. The Complainant made no showing that the City’s denial of the lease extension had any basis in protecting another tenant on the Airport.” (p. 10.)

Finally, Marina alleged that the City violated Grant Assurance 29, Airport Layout Plan, (“ALP”), but provided no additional information or evidence to allow the Director to review the allegation. “Marina Aviation has not provided any evidence that the City is in violation of its AIP obligations other than to allege that enforcement of the Resolution is somehow connected to the ALP. There is insufficient evidence to investigate or substantiate an allegation of a violation under Grant Assurance 29. Therefore, the Director finds that the claim warrants no further action by this office.” (p. 10.)

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