Tenant Did Not Assign Right to Improvement Allowance

A lease required an owner to pay a $340,000 tenant improvement allowance within 45 days of the tenant's providing renovation documents. The tenant made $345,679 in improvements, and sent the owner the required documents on Aug. 4, 2005. Within a month, the owner sent the tenant a check for the allowance, but then stopped payment without explanation.

The tenant later assigned its lease. Its assignment agreement said that the tenant assigned its rights arising on or after April 1, 2006, to the assignee. The tenant then demanded that the owner pay the allowance. When the owner refused, the tenant sued. The owner argued that the tenant had assigned its right to recover the allowance to the assignee.

A federal court in Pennsylvania ruled that the tenant had not assigned its right to recover the allowance. The assignment agreement's “plain meaning” indicates that the tenant assigned only future rights to the assignee. The tenant's right to the allowance arose eight months before the April 2006 date, and the owner sent the allowance check five months before the assignment agreement was signed.

The court noted that the owner did not deny owing the allowance; rather, it argued that only the assignee could pursue the allowance claim. However, after the tenant started its lawsuit, the assignee signed an agreement indicating that it would not pursue the allowance claim and that it viewed the tenant as the rightful owner of the allowance.

• Retail Brand Alliance, Inc. v. Rockvale Outlet Center, LP: Civil Action No. 06-01857, 2006 U.S. Dist. LEXIS 78683 (U.S. Dist. Ct. E.D. Pa. 10/26/06).