CC 2024-10-08_09g RE/MAX Lease Agreement_214 East Branch StreetItem 10.a.
MEMORANDUM
TO: City Council
FROM: Bill Robeson, Assistant City Manager/Public Works Director
SUBJECT: Approval of a Six-Month Lease Agreement Between the City of Arroyo
Grande and RE/MAX Success for Property Located at 214 East Branch
Street
DATE: October 8, 2024
RECOMMENDATION:
1) Adopt a Resolution authorizing the City Manager to execute a six-month lease
agreement, in substantially final form, between the City of Arroyo Grande and RE/MAX
Success for the City-owned property at 214 East Branch Street, also known as Old City
Hall, subject to any minor, technical, or non-substantive changes as approved by the City
Manager in consultation with the City Attorney; and
2) Determine that the approval of a short-term lease agreement for 214 East Branch
Street is not a project subject to the California Environmental Quality Act (“CEQA”)
because it has no potential to result in either a direct, or reasonably foreseeable indirect,
physical change in the environment. (State CEQA Guidelines, §§ 15060, subd. (c) (2)-
(3), 15378). The lease of the property, where no development or demolition is proposed,
constitute an administrative activity of the City. Alternatively, the adoption of resolution to
enter a lease agreement is exempt from CEQA on that basis that it can be seen with
certainty that there is no possibility that the activity in question may have a significant
effect on the environment. (State CEQA Guidelines, § 15061, subd. (b)(3).) The entering
into a lease agreement is for the collection of rental fees and does not result in new
construction or physical change in the environment.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The subject six-month lease will keep an active lease term at the site, and the monthly
rental cost is unchanged from the City’s prior lease on the site, so minimal financial impact
is projected at this phase. The temporary lease is intended to allow for further specialized
evaluations of specific aspects of the building, which will provide accurate cost estimates
regarding possible future building repairs and a longer-term disposition.
Page 79 of 99
Item 10.a.
City Council
Approval of a Six-Month Lease Agreement Between the City of Arroyo Grande and
RE/MAX Success for Property Located at 214 East Branch Street
October 8, 2024
Page 2
BACKGROUND:
Soon after the City Council's February 23, 2010, decision to purchase the property at 300
East Branch Street (the former Farm Credit building) to establish a new City Hall, staff
was relocated from the Old City Hall building at 214 East Branch Street.
On October 12, 2010, the City Council approved a lease agreement with RE/MAX Del
Oro Property Inc. for the entire 3,200-square-foot Old City Hall building. RE/MAX Del Oro,
the tenant for 14 years, is in the process of terminating its lease, which expires on October
8, 2024.
ANALYSIS OF ISSUES:
RE/MAX Success is the new tenant that would utilize the Old City Hall space during a six-
month lease period. The former owner of RE/MAX Del Oro has retired, and a new lease
needs to be executed with RE/MAX Success.
The new six-month lease rental cost is proposed to remain at $4,202.8 4 the ending rental
cost for RE/MAX Del Oro. The proposal not to change the rent amount is based on the
need for the City to evaluate the building further, the inconvenience of inspectors entering
all parts of the building over several weeks, and to evaluate City’s options with respect to
a longer-term disposition of the City owned site. The City has evaluated the site and the
need to conduct further inspections, and find this short-term lease at the negotiated rental
rate is not less that the fair market value of the site at its highest and best use in the short-
term.
Most of the existing terms of the original lease (except for the lease period and a Repair
and Maintenance clause) will be applied to the new lease. Key terms of the proposed
lease are as follows:
A six-month term.
The tenant will pay possessory interest taxes.
The tenant will be provided half of the basement at no additional cost, and the City
has reserved the right to continue using the other half for storage.
The tenant will pay operating expenses, including electric, gas, cable, telephone,
water, sewer, and garbage.
RE/MAX Success to carry a $1,000,000 liability insurance policy naming the City
as an additional insured.
As described above, a previous lease provision that has been removed for this temporary
six-month lease period is a “Repair and Maintenance” clause, stating, “Tenant shall repair
and maintain the roof, structural foundations, exterior walls, Common Are as, the heating,
air conditioning, electrical, plumbing and water systems, if any.” This term is not
applicable during this phase of additional building condition evaluations. This term may
be reinstated if a long-term lease or other disposition is pursued.
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Item 10.a.
City Council
Approval of a Six-Month Lease Agreement Between the City of Arroyo Grande and
RE/MAX Success for Property Located at 214 East Branch Street
October 8, 2024
Page 3
The next step is to conduct more detailed inspections of certain facets of the building,
such as the electrical system, foundation, heating, ventilation, and air conditioning
(HVAC), and compliance with the Americans with Disabilities Act (ADA). After these
inspections are completed and accurate costs are formulated, staff can better provide
more in-depth information on which the City Council can base future decisions regarding
this City-owned property.
The City substantially complied with the notice requirements associated with the
“economic opportunity” statutes (Government Code section 55200, et seq.). As
articulated in the City’s published notice, the proposed six-month lease allows the City to
convert office space into income-producing space over a short-term period while it
investigates options for a longer-term property disposition of the real property and
represents the highest and best use of the property in the short-term.
The proposed six-month lease does not constitute a “disposition” under the Surplus Land
Act. Specifically, the proposed six-month lease is: (A) for a term of 15 years or less; and
(B) there will be no development or demolition on the site over the six-month term.
(Government Code section 54221(d)(2).).
ALTERNATIVES:
The following alternatives are provided for the Council’s consideration:
1. Authorize the City Manager to execute a six-month lease agreement between the
City of Arroyo Grande and RE/MAX Success for the City-owned property at 214
East Branch Street subject to any minor, technical, or non-substantive changes as
approved by the City Manager in consultation with the City Attorney;
2. Do not approve a six-month lease agreement with RE/MAX Success, which may
result in the building's vacancy due to upcoming inspections and possible future
repairs; or
3. Provide other direction to staff.
ADVANTAGES:
A six-month lease will allow for further specialized evaluations of specific aspects of the
building while allowing the City to consider longer-term options, including a possible
disposition under the Surplus Land Act. These evaluations will provide accurate cost
estimates regarding possible repairs and potentially aid in developing long -term lease
conditions and/or other options for the property.
DISADVANTAGES:
The six-month lease provides only a short-term solution for the City-owned site.
ENVIRONMENTAL REVIEW:
The approval of a short-term lease agreement for 214 East Branch Street, is not a project
subject to the California Environmental Quality Act (“CEQA”) be cause it has no potential
Page 81 of 99
Item 10.a.
City Council
Approval of a Six-Month Lease Agreement Between the City of Arroyo Grande and
RE/MAX Success for Property Located at 214 East Branch Street
October 8, 2024
Page 4
to result in either a direct, or reasonably foreseeable indirect, physical change in the
environment. (State CEQA Guidelines, §§ 15060, subd. (c)(2)-(3), 15378). The lease of
the property, where no development or demolition is pro posed, constitute an
administrative activity of the City. Alternatively, the adoption of resolution to enter a lease
agreement is exempt from CEQA on that basis that it can be seen with certainty that there
is no possibility that the activity in question may have a significant effect on the
environment. (State CEQA Guidelines, § 15061, subd. (b)(3).) The entering into a lease
agreement is for the collection of rental fees and does not result in new construction or
physical change in the environment.
PUBLIC NOTIFICATION AND COMMENTS:
A Public Hearing Notice and Summary of Lease Agreement were published in the
newspaper on September 26, 2024, and October 3, 2024, and published on the City’s
website, in substantial compliance with the “Economic Opportunities” statutes under State
law. The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
ATTACHMENTS:
1. Proposed Resolution
2. Lease Agreement in Substantially Final Form
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RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
ARROYO GRANDE AUTHORIZING THE CITY MANAGER
TO EXECUTE A SIX-MONTH LEASE BETWEEN THE CITY
OF ARROYO GRANDE AND RE/MAX SUCCESS FOR THE
CITY-OWNED PROPERTY AT 214 EAST BRANCH
STREET, ALSO KNOWN AS OLD CITY HALL
WHEREAS, the City of Arroyo Grande (“City”) owns the commercial property located at
214 E. Branch St., Arroyo Grande, California, 93420 (the “Property”). The Property is
improved with a commercial office building and other improvements; and
WHEREAS, RE/MAX Success is seeking to enter into a six-month lease agreement
(“Lease”) with the City for a portion of the Property consisting of approximately 3,200
square foot building; and
WHEREAS, the City, on July 23, 2024 conducted a commercial building inspection and
inspection report through Professional Inspection Services, a third-party inspection
company; and
WHEREAS, the City, after review of the inspection report, found that building conditions
such as the foundation, electrical, heating, ventilation and air-conditioning systems would
need additional inspection; and
WHEREAS, the City and RE/MAX Success have agreed to a six-month lease to allow
additional inspections of the building to occur before the City considers a longer-term
disposition; and
WHEREAS, after the applicable building inspections have occurred and at the end of the
six-month lease term, the Council will consider the resulting inspection information and
direct staff on how to proceed with a longer-term disposition; and
WHEREAS, the City substantially complied with the notice requirements associated with
the “economic opportunity” statutes (Government Code section 55200, et seq.), and the
proposed six-month lease allows the City to convert office space into income-producing
space over a short-term period while City investigates options for a longer-term property
disposition, and represents the highest and best use of the property in the short-term; and
WHEREAS, the proposed six-month lease does not constitute a “disposition” under the
Surplus Land Act, as the proposed six-month lease is: (A) for a term of 15 years or less;
and (B) there will be no development or demolition on the site over the six -month term.
(Government Code section 54221(d)(2)).
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Arroyo Grande,
as follows:
ATTACHMENT 1
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RESOLUTION NO.
PAGE 2
1. The foregoing recitals are true and correct and are incorporated herein.
2. The term of this Lease (“Initial Term”) shall be for a period of six (6) months, unless
terminated earlier.
3. Tenant shall pay to Landlord as rent for the Premises the sum of Four Thousand
Two Hundred Two and 84/100 Dollars ($4,202.84) per month (“Rent”).
4. The City Council authorizes the City Manager to execute a six-month lease
agreement (attached in substantially final form) between the City of Arroyo Grande
and RE/MAX Success for the City-owned property at 214 East Branch Street, also
known as Old City Hall, subject to any minor, technical, or non-substantive changes
as approved by the City Manager in consultation with the City Attorney.
5. Adoption of this Resolution for a short-term lease agreement for 214 East Branch
Street, is not a project subject to the California Environmental Quality Act (“CEQA”)
because it has no potential to result in either a direct, or reasonably foreseeable
indirect, physical change in the environment. (State CEQA Guidelines, §§ 15060,
subd. (c)(2)-(3), 15378). The lease of the property, where no development or
demolition is proposed, constitute an administrative activity of the City.
Alternatively, the adoption of the resolution to enter a lease agreement is exempt
from CEQA on that basis that it can be seen with certainty that there is no
possibility that the activity in question may have a significant effect on the
environment. (State CEQA Guidelines, § 15061, subd. (b)(3).) The entering into a
lease agreement is for the collection of rental fees and does not result in new
construction or physical change in the environment.
On motion of Council Member ______, seconded by Council Member _____, and by the
following roll call vote, to wit:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 8th day of October, 2024.
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RESOLUTION NO.
PAGE 3
CAREN RAY RUSSOM, MAYOR
ATTEST:
JESSICA MATSON, CITY CLERK
APPROVED AS TO CONTENT:
MATTHEW DOWNING, CITY MANAGER
APPROVED AS TO FORM:
ISAAC ROSEN, CITY ATTORNEY
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RESOLUTION NO.
PAGE 4
EXHIBIT A
LEASE AGREEMENT
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LEASE AGREEMENT
1. PARTIES: This Lease (“Lease”) is made and entered into as of this _____
day of __________, 2024 (“Effective Date”) by and between CITY OF ARROYO GRANDE, a
California municipal corporation (“Landlord”), and p16:3, a California C corporation DBA RE/MAX
SUCCESS (“Tenant”). The Landlord and Tenant are sometimes referred to individually as a “Party”
and collectively as the “Parties.”
2. PROPERTY. Landlord owns the commercial property located at 214 E. Branch
St., Arroyo Grande, California, 93420 (the “Property”). The Property is improved with an industrial
office building and other improvements.
3. PREMISES: Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord a portion of the Property consisting of approximately 3,200 square feet, referred to herein as
the "Premises" and shown on Exhibit A. The Property also contains common areas which Tenant may
use on a non-exclusive basis in common with other tenants of the Property, consisting of parking area,
sidewalks, driveways, entrances and public walkways necessary for access of the Property (the
“Common Areas”). Tenant’s non-exclusive right to use the Common Area shall be considered part of
the Premises. Tenant’s proportionate share of the Property is agreed to be % (“Proportionate
Share”), which represents the rentable square footage of the Premises to the total rentable area of the
Property. Tenant shall be entitled to use approximately % of basement space, in the western
portion of the Premises. Landlord reserves the right to use the approximately 50% of basement space,
in the eastern portion of the Premises.
4. TERM: The term of this Lease (“Initial Term”) shall be for a period of six
(6) months from and after the Effective Date of this Lease, terminating on __________________,
202_____, unless terminated earlier. Upon expiration of the initial term of this Lease, if no new lease
agreement is executed and the Tenant remains in possession of the property with the consent of the
Landlord, this Lease shall continue on a month-to-month basis under the same terms and conditions.
Either party may terminate this Lease by giving the other party written notice at least ninety (90) days
in advance.
5. OCCUPANCY. Tenant acknowledges it has been in occupancy of the Premises
since on or about , under a sublease from DEL ORO PROPERTIES, INC., a California
corporation d/b/a RE/MAX Del Oro, which entered into that certain Lease Agreement dated April 27,
2021 with Landlord (“Prior Lease”). Accordingly, the Prior Lease is hereby terminated by the execution
of this Lease (except for such provisions which expressly survive). Tenant shall retain possession of
the Premises on the Initial Term subject to all terms and conditions of this Lease, and provided Tenant
delivers an insurance certificate to Landlord upon execution. The effectiveness of this Lease is
conditional upon Tenant’s delivery of the insurance certificate and first month's rent and security
deposit.
6. RENT: Tenant shall pay to Landlord as rent for the Premises the sum of Four
Thousand Two Hundred Two and 84/100 Dollars ($4,202.84 ) per month (“Rent”).
EXHIBIT A
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(a) Late Charge. Tenant acknowledges that late payment by Tenant to
Landlord of rent will cause Landlord to incur costs not contemplated by this Lease. If any installment
of rent due from Tenant is not received by Landlord within five (5) days after it becomes due, Tenant
shall pay to Landlord an additional sum of 5% of the overdue rent as a late charge. The parties agree
that this late charge represents a fair and reasonable estimate of the costs that Landlord will incur by
reason of late payment by Tenant. Acceptance of any late charge shall not constitute a waiver of
Tenant's default with respect to the overdue amount or prevent Landlord from exercising any of the
other rights and remedies available to Landlord.
(b) Interest on Unpaid Rent. Rent or other charges under this Lease not paid
within five (5) days of the date due shall, in addition to any late charges under Section 6(a) above, bear
interest at the lesser of the maximum legal rate or 10% per annum from the date due until paid.
(c) Annual Adjustment. Beginning on the first anniversary of the
Commencement Date, Base Rent shall increase annually at the end of each 12-month period by the
greater of (i) four percent (4%) or (ii) increase in the Consumer Price Index (“CPI”) as determined by
the U.S. Bureau of Labor Statistics for all Urban Consumers for the San Francisco/Oakland/San Jose
Metropolitan Area over the previous year. Should the CPI be discontinued, the inde x used for
comparison shall be a comparable index as designated by the Bureau. It is recognized by both parties
that the Index for any month is not published for approximately two months. Tenant shall, therefore,
continue to pay the current rental paid by Tenant until such time as the new rental is calculated and, at
that time, Tenant shall pay within ten (10) days of notice of the new Base Rent the new amount plus
arrearages. In no event shall Base Rent ever decrease below the prior year’s Base Rent even if the CPI
is negative. In such event, the Base Rent shall remain the same
(d) Place of Payment of Rent. Rent, and all other sums which shall become
due under this Lease, including but not limited to late charges and any additional charges owed by
Tenant shall be payable by hand delivery or mail at 300 E. Branch St., Arroyo Grande, CA 93420, or
at such other place as Landlord may designate from time to time in writing. Mailed payments must be
received (not postmarked) by Landlord by the date due.
7. CONDITION OF, AND IMPROVEMENTS TO, PREMISES.
(a) Improvements. Under this Lease, Landlord shall have no obligation or
responsibility, actual or implied, to install, construct, accommodate, or make any improvements to the
Premises prior to, or as a condition of, Tenant's occupation of the Premises.
(b) As-Is Condition. Tenant warrants and agrees that Tenant is currently in
possession of the Premises. Tenant agrees to take possession of the Premises under this Lease in its
AS-IS condition (which exists on the date this Lease is signed). Landlord makes no representations
regarding the condition, status, compliance with laws or suitability for a particular purpose for Tenant's
use.
(c) Condition Upon Surrender. Upon termination of this Lease, Tenant shall
surrender the Premises to Landlord in as good condition as when originally received, ordinary wear
and tear and damage by fire, earthquake, flood or act of God excepted, and including any repairs or
improvements made by Tenant. If Tenant fails to maintain the Premises in good order and repair, after
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thirty (30) days' prior written notice, Landlord may, at its option, make such repairs, and Tenant shall
pay the reasonable cost thereof as additional rent hereunder within ten (10) days after receipt of a
written statement therefor. In the event the giving of thirty (30) days' prior notice may result in
additional damage to the Premises, Landlord may make such repairs, at Tenant's expense, without thirty
days' prior written notice.
(d) Inspection by Certified Access Specialist. Landlord discloses that the
Premises have not undergone inspection by a Certified Access Specialist as referenced in California
Civil Code Section 1938 subsection (e) which provides: "A Certified Access Specialist (CASp) can
inspect the subject premises and determine whether the subject premises comply with all of the
applicable construction-related accessibility standards under state law. Although state law does not
require a CASp inspection of the subject premises, the commercial property owner or lessor may not
prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the
occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The
parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the
payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct
violations of construction-related accessibility standards within the premises." Pursuant to the
foregoing Section 1938(e), Tenant acknowledges and agrees that, if Tenant wishes to have the Premises
inspected by a CASp: (i) Tenant must notify Landlord on or before the date when Tenant executes this
Lease pursuant to the election below; (ii) the inspection will be at Tenant's sole cost and expense; (iii)
the inspection must be scheduled through Landlord and in coordination with the Building’s property
manager; (iv) any repairs or modifications necessary to correct any violation of construction -related
accessibility standards that is noted in the CASp report shall be Tenant’s responsibility; and (v) Tenant
must provide a copy of the CASp report to Landlord on completion. By initialing below, Tenant
represents that:
Tenant wishes to have a CASp inspection of the Premises Initials: ______________
Tenant hereby waives its right to have a CASp inspection of the Premises Initials: ____________
8. USE: Tenant shall use and occupy the Premises only for general office use (the
“Agreed Use”), or any other legal use which is reasonably comparable thereto, and for no other purpose.
Tenant shall not use or permit the use of the Premises in a manner that is unlawful, creates damage,
waste or a nuisance, or that disturbs owners and/or occupants of, or causes damage to neighboring
properties.
9. USES PROHIBITED. In addition to uses prohibited pursuant to Paragraph 7,
Tenant shall not do or permit anything to be done in or about the Premises nor bring or keep anything
therein which is not within the permitted use of the Premises which will in any way increase the existing
rate of or affect any fire or other insurance upon the Property or any of its contents, or cause a
cancellation of any insurance policy covering the Property or any part thereof or any of its content s.
Tenant shall not use the Premises for any cannabis related uses, dispensary, manufacture, assembly, the
sale of cannabis or accessories related to cannabis products. Tenant shall not do or permit anything to
be done in or about the Premises which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Property or injure or annoy them or use or allow the Premises to be used
for any improper, immoral, unlawful or objectionable purpose; nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises. Tenant shall not commit or allow to be committed
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any waste in or upon the Premises. Under no circumstances shall the right herein granted to use the
Common Areas be deemed to include the right to sell or solicit in any manner or store any property,
temporarily or permanently, in the Common Areas. Any such storage shall be permitted only by the
prior written consent of Landlord or Landlord's designated agent, which consent may be revoked at any
time. In the event that any unauthorized storage shall occur then Landlord shall have the right, without
notice, in addition to any other rights and remedies that it may have, to remove the property and charge
the cost to Tenant, which cost shall be payable as additional rent immediately upon demand by
Landlord.
10. COMPLIANCE WITH LAWS/HAZARDOUS MATERIALS.
(a) Tenant, at Tenant's expense, shall comply with and cause all of Tenant's
agents to comply with all applicable laws, ordinances, rules and regulations of governmental authorities
applicable to the Premises or the use or occupancy thereof, including, without limitation, the law
commonly known as the Americans With Disabilities Act and California Code of Regulations Title 8,
Sections 3281 through 3299 (collectively, "Laws").
(b) Tenant shall not cause or permit any Hazardous Materials, as defined
below, to be brought upon, kept, used, discharged, deposited or leaked in or about the Premises or the
Property by Tenant or any of Tenant's agents or by anyone in the Premises (other than Landlord or its
agents, employees or contractors), except to the extent such Hazardous Materials are cleaning or office
supplies customarily kept or used by typical tenants similar to Tenant and are kept and used in
accordance with all applicable laws. If Tenant breaches the obligations stated in the preceding sentence,
or if the presence of any Hazardous Material on the Premises or the Property caused or suffered or
permitted by Tenant or any of Tenant's agents or by anyone in the Premises (other than Landlord or its
agents, employees or contractors) results in contamination of the Premises or the Property, or if
contamination of the Premises or the Property by any Hazardous Material otherwise occurs for which
Tenant is legally liable, then Tenant shall indemnify, defend and hold Landlord harmless from any and
all claims, damages, costs, liabilities and expenses (including, without limitation, diminution in value
or use of the Property, attorneys' fees, consultant fees and expert fees) which arise during or after the
Term as a result of such contamination. This indemnification shall include, without limitation, costs
incurred in connection with any investigation of site conditions or any clean -up, remedial, removal or
restoration work on or under the Premises. "Hazardous Material" means any hazardous or toxic
substance, material or waste which is or becomes regulated by any local, state or federal governmental
authority or by common law decisions, including without limitation (i) all chlorinated solvents, (ii)
petroleum products or by-products, (iii) asbestos and (iv) polychlorinated biphenyls.
11. WASTE; NUISANCE; QUIET ENJOYMENT. Tenant shall not suffer or
commit any waste or nuisance on the Premises, nor shall Tenant interfere with or obstruct the rights of
or disturb the quiet enjoyment of any other tenant or occupant of the building or injure or annoy them.
Tenant shall not use or allow the Premises to be used for any improper, immoral, or objectionable
purposes, to be determined Landlord's sole and absolute judgment.
(a) Tenant shall, at Tenant's sole cost and expense, maintain the Premises
above, in good condition and repair. Said maintenance shall include but not be limited to, the interior
of the Premises, exterior doors, walls and windows, all fixtures and equipment, including without
limitation, heating and ventilation systems, plate glass, electrical wiring, plumbing fixtures, plumbing
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drains (from the interior of the Premises to the point of connection of Tenant's drainage system with
the sanitary sewer system owned, managed, and/or maintained by the local municipality). Tenant
hereby waives California Civil Code Sections 1932(1), 1941 and 1942 and any other applicable existing
or future law, ordinance or governmental regulation permitting Tenant to make repairs at Landlord's
expense.
12. SIGNS. All signs and graphics of every kind visible in or from public view or
corridors, or the exterior of the Premises, whether inside or outside the Premises, shall be subject to
Landlord’s prior written approval and shall be subject to compliance with any applicable Laws,
including local sign ordinances and Historic Preservation laws.
13. TRADE FIXTURES AND EQUIPMENT. Tenant at its own expense shall
provide and maintain all trade fixtures and equipment reasonably required to enable it to conduct its
business in the Premises in a business-like manner. Tenant shall keep all trade fixtures and equipment
clean and in good repair. Kitchens or other food preparation facilities shall be steam cleaned annually.
Landlord may inspect the Premises in its sole discretion to ensure good maintenance practices and
review the current condition of the Premises. Such fixtures and equipment shall remain the property
of Tenant, and Tenant may remove or if required to do so by Landlord, shall remove the same or any
part thereof upon the termination of this Lease. Prior to lease expiration or earlier termination, Tenant
shall repair at its own expense any damage to the Premises caused by its removal of said fixtures or
equipment. All trade fixtures and equipment installed by Tenant pursuant thereto shall not be subject
to, and shall be free of any lien for payment of rent by Tenant or for the performance of any other
obligation of Tenant. Tenant shall keep Tenant's fixtures and equipment insured for full replacement
value.
14. TAXES: Tenant will be and remain responsible for all property taxes and
assessments, if any, which may be due or levied against the real property. Tenant recognizes and
understands that this Lease may create a possessory interest subject to property taxes and that, if a
possessory interest is created, Tenant shall be responsible for payment of property taxes levied against
such possessory interest, and shall pay such possessory interest taxes directly to the taxing authority
prior to delinquency.
15. UTILITIES: Tenant shall pay for all water, gas, heat, light, power, telephone,
trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon.
16. DEFAULT AND LANDLORD'S REMEDIES.
(a) Default. The occurrence of any of the following shall constitute a default
by Tenant:
(i) Tenant shall fail to pay when due any rent or any other monetary
sum payable under this Lease.
(ii) Tenant shall fail to observe, keep or perform any of the other
terms, covenants, agreements or conditions contained in this Lease if such default continues for a period
of ten (10) days after written notice by Landlord specifying the nature of the default with reasonable
particularity, unless the nature of the default is such that more than ten (10) days is required to cure it
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and Tenant commences to cure it within such ten (10) -day period and thereafter diligently pursues it
to completion.
(iii) Tenant shall become bankrupt or insolvent or make a transfer in
fraud of creditors, or make an assignment for the benefit of creditors, or take or have taken against
Tenant any proceedings of any kind under any provision of the Federal Bankruptcy Act or under any
other insolvency, bankruptcy or reorganization act and, in the event any such proceedings are
involuntary, Tenant is not discharged from the same within thirty (30) days thereafter.
(iv) A receiver is appointed for a substantial part of the assets of
Tenant, and such receivership is not released within thirty (30) days.
(v) The abandonment of the Premises by Tenant, or the vacation
(hereby defined to be thirty (30) or more consecutive days of continual absence from the Premises) of
the Premises by Tenant.
(vi) This Lease or any estate of Tenant hereunder shall be levied upon
by any attachment or execution and such levy is not released within thirty (30) days.
Notices given under this Section shall specify the alleged default and the applicable Lease provisions,
and shall demand that Tenant perform the provisions of this Lease or pay the ren t that is in arrears, as
the case may be, within the applicable period of time, or quit the Premises.
(b) Landlord's Remedies. If any default by Tenant shall occur, and following
notice of default as required by this Lease (for the period applicable to the default under the applicable
provision of this Lease), Landlord shall have the following remedies in addition to all other rights and
remedies provided by law or equity, to which Landlord may resort cumulatively or in the alternative.
(i) Landlord shall have the immediate option to terminate this Lease
and all rights of Tenant hereunder by giving written notice of such intention to terminate. In the event
that Landlord shall so elect to terminate this Lease, then Landlord may recover from Tenant:
(1) The worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus
(2) The worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of award exceeds the
amount of such rental loss Tenant proves could have been reasonably avoided; plus
(3) The worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental
loss that Tenant proves could be reasonably avoided; plus
(4) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or
which in the ordinary course of things would be likely to result therefrom; and
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(5) At Landlord's election, such other amounts in addition to
or in lieu of the foregoing as may be permitted from time to time by applicable law.
As used in Subparagraphs (a) and (b) above of this Section, the "worth at the time of award" is
computed by allowing interest at the maximum rate an individual is permitted by law to charge. As
used in subparagraph (c) above, the "worth at the time of award" is computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus
one percent (1%).
(ii) In the event of the vacation or abandonment of the Premises by
Tenant, or in the event that Landlord shall elect to reenter as provided herein or shall take possession
of the Premises pursuant to legal proceeding or pursuant to any notice provided by law, then Landlord
shall have the remedy specified by Civil Code Section 1951.4, in which Landlord may from time to
time recover all rental as it becomes due or relet the Premises or any part thereof for the account of
Tenant on such term or terms and at such rental or rentals and upon such other terms and conditions as
Landlord in its sole discretion may deem advisable, with the right to make alterations and repairs to the
Premises. In the event that Landlord shall elect so to relet, then rentals received by Landlord from such
reletting shall be applied first, to the payment of any indebtedness, other than rent due hereunder, owed
by Tenant to Landlord; second, to the payment of any cost (including commissions) of such reletting;
third, to the payment of the cost of any alterations and repairs to the Premises; fourth, to the payment
of rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in
payment of future rent as the same may become due and payable hereunder. Should that portion of
such rentals received from such reletting during any month, which is applied to the pa yment of rent
hereunder, be less than the rent payable during that month by Tenant hereunder, then Tenant shall pay
such deficiency to Landlord upon demand. Tenant shall also pay to Landlord, as soon as ascertained,
any and all costs and expenses incurred by Landlord in such reletting or in making such alterations and
repairs not covered by the rentals received from such reletting.
No reentry or taking possession of the Premises by Landlord pursuant to this Section shall be
construed as an election to terminate this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court of competent jurisdiction.
17. ASSIGNMENT AND SUBLETTING. Tenant shall not either voluntarily, or by
operation of law, assign, transfer, mortgage, pledge, hypothecate or encumber this Lease or any interest
therein, and shall not sublet the said Premises or any part thereof, or any right or privilege appurtenant
thereto, or allow any other person (the employees, agents, servants and invitees of Tenant excepted) to
occupy or use the said Premises, or any portion thereof, without first obtaining the written consent of
Landlord which may be withheld in Landlord’s sole discretion. If an assignment or subletting involves
a use other than that permitted in this Lease, Tenant must comply with said use. Consent to one
assignment, subletting, occupation or use by another person shall not be deemed to be consent to any
subsequent assignment, subletting, occupation or use by another person. Consent to any such
assignment or subletting shall in no way relieve Tenant of any liability under this Lease. Any such
assignment or subletting without such consent shall be void, and shall, at the option of the Landlord,
constitute a default under the terms of this Lease. No sublease or assignment shall release Tenant from
continuing liability hereunder. In the event that Landlord shall consent to a sublease or assignment
hereunder, Tenant shall pay Landlord reasonable attorney fees and costs incurred in connection with
the processing of documents necessary to giving of such consent. Any excess consideration above the
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rental rate provided in this Lease Tenant is entitled to as a result of any assignment or sublease shall be
divided and paid 50% to Tenant and 50% to Landlord; provided, however, that if Tenant is in default
under this Lease, Landlord shall be entitled to all such excess consideration.
(a) Procedures. Should Tenant desire to assign, transfer, sublet, mortgage,
pledge, hypothecate or encumber this Lease or any interest therein (a “Transfer”), Tenant shall request,
in writing, Landlord's consent to the proposed Transfer at least 60 days before the intended effective
date of the proposed Transfer (which request shall be accompanied by a payment of Five Hundred
Dollars ($500.00) to reimburse Landlord for costs incurred in connection with reviewing such proposed
Assignment), which request shall include any information reasonably requested by Landlord to
evaluate the proposed Transfer. Within 30 days after receipt of Tenant's request for consent to the
proposed Transfer together with all of the above-required information, Landlord shall respond and shall
have the right to: (a) consent to the proposed Transfer; (b) refuse to consent to the proposed Transfer;
or (c) terminate this Lease, such termination to be effective 30 days after Tenant's receipt of Landlord's
notice electing to so terminate. If Landlord shall exercise its termination right hereunder, Landlord
shall have the right to enter into a lease or other occupancy agreement directly with the proposed
transferee, and Tenant shall have no right to any of the rents or other consideration payable by such
proposed transferee under such other lease or occupancy agreement. A consent to one Transfer by
Landlord shall not be deemed to be a consent to any subsequent Transfer to any other party.
(b) Standard for Consent. Tenant agrees that Landlord may refuse its
consent to the proposed transfer on any reasonable grounds, and (by way of example and without
limitation) Tenant agrees that it shall be reasonable for Landlord to withhold its consent if any of the
following situations exist or may exist: (a) the proposed assignee, subtenant or transferee (each a
"Transferee") proposes to change the use of the Premises from the permitted use pursuant to Section 8,
and the new proposed use of the Premises (i) is a non-retail use; or (ii) is a use which would breach any
exclusive use rights granted in writing to another tenant in the Property; or (iii) is a use which would
duplicate the primary use of any other tenant or occupant in the Property; or (iv) in Landlord's
reasonable opinion, is inconsistent with the tenant mix in the Property at the time of the request for
Landlord's consent (excepting the use specified in Section 8 above); (b) the proposed Transferee's
financial condition, net worth or liquidity is inadequate, based upon Landlord's reasonable business
judgment consistent with generally accepted industry standards necessary to support all of the financial
and other obligations of Tenant under this Lease; (c) the business reputation or character of the proposed
Transferee is not reasonably acceptable to Landlord; (d) the proposed Transferee is not likely to conduct
on the Premises a business of a quality substantially equal to that conducted by Tenant, including
Landlord's ability to obtain Percentage Rent; or (e) the business of the proposed Transferee is not, in
Landlord's reasonable judgment, a business that is likely to attract patrons to the Property, based on the
demographics and clientele of the Property, or the business or reputation of the proposed Transferee is
inconsistent with the image of the Property; (f) the proposed Transferee would, in Landlord's reasonable
judgment, be unlikely to generate revenues in sufficient amounts to sustain the level of percentage rent
obligations then being incurred by Tenant; (g) the proposed Transferee will create a vacancy elsewhere
in the Property; (h) the proposed Transferee is a person with whom Landlord is, or recently has been,
within the past three (3) months, negotiating to lease space in property owned by Landlord, including
the Property; (i) Tenant is in default under the Lease, or has defaulted hereunder on more than three (3)
occasions during the twelve (12) months preceding the request by Tenant; (j) the proposed business
plan (or past business history) of the proposed Transferee indicates a possible likelihood of detriment
to any portion of the Property or to the Rent to be received by Landlor d hereunder; (k) the proposed
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Transferee will operate under a trade name other than that stated in this Lease; and/or (l) the proposed
Transferee does not, in Landlord's reasonable judgment, have sufficient business experience (including
substantial experience in comparable retail centers) to successfully operate a retail establishment in the
Premises in the manner contemplated in the Lease.
18. DESTRUCTION OF PREMISES.
(a) Destruction Due to Risk Covered by Insurance. If, during the term of
this Lease and any renewal term, the Premises or the Property and other improvements in which the
Premises are located are totally or partially destroyed from a risk covered by insurance carried by either
Tenant or Landlord for the Property, rendering the Premises totally or partially inaccessible or unusable,
Landlord shall restore the Premises or the Property, and other improvements in which the Premises are
located, to substantially the same condition as they were immediately before destruction if they can be
repaired within 270 days from date of destruction. Such destruction shall not terminate this Lease. If
the existing laws do not permit the restoration, either party can terminate this Lease immediately by
giving notice to the other party. Provided, however, if the cost of the restoration exceeds the amount
of proceeds received from the insurance, or the estimate of time to fully restore the Premises exceeds
the lesser of 270 days or the remaining Term of the Lease, Landlord can elect to terminate this Lease
by giving notice to Tenant within fifteen (15) days after determining that the restoration cost will exceed
the insurance proceeds.
(b) Destruction Due to Risk Not Covered by Insurance. If, during the term
of this Lease and any renewal term, the Premises or the Property and other improvements in which the
Premises are located are totally or partially destroyed by a risk not covered by the insurance, rendering
the Premises totally or partially inaccessible or unusable, Landlord can elect to terminate this Lease by
giving notice to Tenant within fifteen (15) days after determining the restoration cost and replacement
value.
(c) Abatement or Reduction of Rent. In case of destruction, there shall be
an abatement or reduction of rent between the date of destruction and the date of substantial completion
of restoration based on the extent to which the destruction interferes with Tenant's use of the Premises.
(d) Waiver of Civil Code Sections. Tenant waives the provisions of
California Civil Code Section 1932(2) and California Civil Code Section 1933(4) with respect to any
destruction of the Premises.
19. INDEMNITY.
(a) Waiver of Claims. To the extent permitted by law, Tenant waives all
claims against Landlord for damage to person or property arising for any reason. Tenant assumes al l
such risks for Tenant and any employees, licensees, invitees, agents, or contractors.
(b) General Indemnity. Tenant shall indemnify, protect, defend (at Tenant's
sole cost and with legal counsel acceptable to Landlord) and hold harmless, Landlord and Landlo rd’s
affiliated entities, and each of their respective members, managers, partners, officers, employees,
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volunteers, council members, board members, lenders, agents, contractors, successors and assigns from
and against any and all claims, judgments, causes of action, damages, penalties, costs, liabilities, and
expenses, including all court costs and attorney fees, arising at any time during or after the Term, as a
result (directly or indirectly) of or in connection with (i) default in the performance of any obligation
on Tenant’s part to be performed under the terms of this Lease, or (ii) Tenant’s use of the Premises, the
conduct of Tenant’s business or any activity, work or things done, permitted or suffered by Tenant or
Tenant’s employees, agents, customers, visitors, invitees, licensees, contractors, assignees or
subtenants (individually, a “Tenant Party” and collectively “Tenant Parties”) in or about the Premises,
the Property, the Common Area or other portions of the Premises except as provided by law or for
claims caused solely by Landlord’s gross negligence or willful misconduct. Tenant’s indemnity is not
intended to nor shall it relieve any insurance carrier of its obligations under policies required to be
carried by Tenant pursuant to the provisions of this Lease to the extent such policies cover the results
of negligent acts or omissions of Landlord, its employees, agents, volunteers, contractors, council
members, board members and officers or the failure of Landlord to perform any of its obligations under
this Lease. The obligations of Tenant under this Section 20(b) shall survive the termination or earlier
expiration of this Lease.
(c) Exemption of Landlord from Liability. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to the Premises and its property including,
but not limited to, Tenant's fixtures, equipment, furniture and alterations, or illness or injury to persons
in, upon or about the Premises, arising from any cause, and Tenant hereby expressly releases Landlord
and waives all claims in respect thereof against Landlord, except only such claims as are caused solely
by Landlord's gross negligence or willful misconduct. Tenant hereby agrees that Landlord shall not be
liable for injury to Tenant's business or any loss of income therefrom or for damage to the property of
Tenant, or injury to or illness or death of Tenant or any Tenant Party or any other person in or about
the Premises, whether such damage, illness or injury is caused by fire, steam, electricity, gas, water or
rain, or from the breakage, leakage or other defects of sprinklers, wires, appliances, ventilation,
plumbing, air conditioning or lighting fixtures, or from any other cause, and whether said damage,
illness or injury results from conditions arising upon the Premises, upon other portions of the Property
or from other sources or places, and regardless of whether the cause of such damage, illness or injury
or the means of repairing the same is inaccessible to Tenant, except only damage, illness or injury
caused solely by Landlord's gross negligence or willful misconduct.
20. ENTRY BY LANDLORD. Except for emergencies such as fire, water intrusion
and the like which may be at any time, Landlord and its agents shall have the right to enter the Premises
at reasonable times to inspect and examine the same and to make such repairs to the Premises as the
Landlord shall deem advisable, and to show the Premises to prospective tenants, buyers or lenders.
21. ATTORNEY’S FEES AND COURT COSTS: In the event of any legal
action arising out of or concerning this Lease or any performance or nonperformance hereunder, the
prevailing party shall be entitled to recover reasonable attorney’s fees and all other costs incurred in
connection therewith or as a result thereof.
22. WAIVER; ACCORD AND SATISFACTION. No delay or omission in the
exercise of any right or remedy of Landlord on any default by Tenant shall impair such right or be
construed as a waiver. The receipt and acceptance by Landlord of delinquent rent shall not constitute
a waiver of any other default; it shall constitute only a waiver of timely payment for the particular rent
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payment involved. No payment by Tenant or receipt by Landlord of a lesser amount than the rent
payment herein stipulated shall be deemed to be other than on account of the rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or payment as rent be
deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice
to Landlord's right to recover the balance of such rent or pursue any other remedy provided in this
Lease.
23. BINDING ON SUCCESSORS AND ASSIGNS: The terms and conditions
of this Lease shall be binding upon and shall inure to the benefit of each of the parties her eto, their
heirs, personal representatives, successors and assigns.
24. TIME OF ESSENCE: Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties under this Lease.
25. NOTICE: All notices, statements, demands, requests, consents, approvals,
authorizations, appointments or designations hereunder by either party to the other shall be in writing
and shall be sufficiently given and served upon the other party, if sent by United States registered mail,
return receipt requested, postage prepaid and addressed as follows:
TO TENANT: RE/MAX Success
Attn:
____________________________
________________, CA ________
TO LANDLORD: City of Arroyo Grande
Attn: City Manager
300 E. Branch St.,
Arroyo Grande, CA 93420
Any Party may change its address by giving notice to the other Party in the manner provided
for in this Section.
26. WAIVERS: No waiver by Landlord or Tenant of any breach hereof or of any
provisions hereof shall be deemed a waiver of any subsequent breach or provision (even if the
subsequent breach is the same as said previous breach or provision).
27. DELIVERY OF RELATED DOCUMENTS: Tenant will execute or
provide, as requested by Landlord, such other documents and information as may be reasonably
necessary to carry out the purpose of this Lease.
28. NO RIGHT TO HOLDOVER: Tenant has no right to retain possession of
the Premises or any part thereof beyond the expiration or termination of this Lease. In the event that
Tenant holds over, then the Rent shall be increased to one hundred fifty percent (150%) of the Rent in
effect during the last month of the Term. Nothing contained herein shall be construed as consent by
Landlord to any holding over by Tenant. The foregoing provisions of this Section are in addition to
and do not affect Landlord's right of re-entry or any rights of Landlord hereunder or as otherwise
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provided by law. If Tenant fails to surrender the Premises upon the expiration of this Lease, Tenant
shall indemnify, protect, defend and hold Landlord harmless from all loss or liability, including without
limitation, any claim made by any succeeding tenant founded on or resulting from such failure to
surrender. Such indemnity shall survive the expiration of this Lease.
29. COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT:
All provisions of this Lease to be observed or performed by Tenant are both covenants and
conditions. In construing this Lease, all headings and titles are for the convenience of the parties only
and shall not be considered a part of this Lease. Whenever required by the context, the singular shall
include the plural and vice versa. This Lease shall not be construed as if prepared by one of the parties,
but rather according to its fair meaning as a whole, as if both parties had prepared it.
30. ESTOPPEL CERTIFICATE. Tenant shall execute and deliver to Landlord
within ten (10) days of request a commercially reasonable estoppel statement. Landlord and Tenant
intend that any estoppel statement delivered pursuant to this Section may be reli ed upon by any
mortgagee, beneficiary, purchaser or prospective purchaser of the building or any interest therein and
failure to execute and return such estoppel shall be a material breach of the Lease.
31. BINDING EFFECT; CHOICE OF LAW: This Lease shall be binding upon
the parties, their personal representatives, successors and assigns and be governed by the laws of the
State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease
shall be initiated in the county in which the Premises are located.
32. SEVERABILITY. If, for any reason whatsoever, any of the provisions hereof
shall be unenforceable or ineffective, all of the other provisions shall be and remain in full force and
effect.
33. AUTHORITY/CONSENTS & APPROVALS. Each of the persons executing
this Lease on behalf of Tenant warrants and represents that Tenant is a duly organized and validly
existing entity, that Tenant has full right and authority to enter into this Lease and that the persons
signing on behalf of Tenant are authorized to do so and have the power to bind Tenant to this Lease.
Tenant shall provide Landlord upon request with evidence reasonably satisfactory to Landlord
confirming the foregoing representations. The approval of Landlord, wherever required in this Lease,
shall mean the approval of the City Council.
34. ENTIRE AGREEMENT; AMENDMENT: This Lease constitutes the entire
agreement between the Parties with respect to the lease of the Premises, and this Lease shall not be
modified, amended, altered, or changed except with the written consent of Landlord and Tenant. Any
provision of this Lease found to be prohibited by law shall be ineffective to the extent of such
prohibition without invalidating the remainder of this Lease.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Parties hereto have caused this Lease to be executed and attested
to by their proper officers hereunto duly authorized and their official seals to be hereto affixed, on
the day and year first set forth above.
TENANT:
RE/MAX Success
By:
Name:
Its:
Date:_______________________________
LANDLORD:
CITY OF ARROYO GRANDE,
a California municipal corporation
By:
Name:
Its:
Date:_______________________________
APPROVED AS TO LEGAL FORM:
BEST, BEST & KRIEGER LLP
By:
Name:
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