(Photo by Richard Graulich/The Palm Beach Post)
The land for Trump International GC in West Palm Beach, Fla. is leased from Palm Beach County and the agreement includes a force majeure provision. But it is unclear whether a pandemic would invoke the provision, and further legal complications could stem from President Trump’s role in affecting the response to the coronavirus outbreak. “[It’s] a highly unusual situation, because you may have the tenant who is seeking relief in charge of protecting against the events upon which that tenant is complaining,” said one attorney. “There are so many permutations; it’s a law school exam question.”
On March 25, Ed Raymundo, finance director for the Mar-a-Lago resort in Palm Beach, Fla. and the Trump International Golf Club in West Palm Beach, Fla., sent an e-mail to the real estate management department of Palm Beach County, Fla., The Palm Beach Post reported. The note asked how the county intended to handle the $88,338 monthly rent that the Trump Organization pays to lease the land for Trump International GC.
Florida Gov. Ron DeSantis had already ordered restaurants and bars to close as the coronavirus pandemic escalated when the e-mail was sent, The Post reported.
“This mandate has resulted in the cancellation of events and forced the Club to close many of its amenities, leaving limited services available to our members,” Raymundo wrote, The Post reported. “In addition, with many New York-based members, the Governor’s most recent order requiring individuals traveling from the tri-state area to self-quarantine further hampers our operation. Your direction in this is greatly appreciated.”
In the days that followed the club’s coronavirus closure, The Post reported, county officials and attorneys pored over lease agreements The Trump Organization finally signed first in 1996, and then in 2002, after a long and controversial lawsuit over the land. The 99-year lease agreement required the company to make monthly payments that have increased over the years to currently be $54,534 for the acreage used for club’s championship Jim Fazio-designed 18-hole golf course, and $33,804 for the smaller, “Trump Nine” nine-hole course that Fazio also designed.
The agreements contain a force majeure provision, The Post reported, that is designed to cover unforeseeable actions, such as hurricanes, floods or other acts of God, that could prevent the contract from being fulfilled. But the contract does not specify that a pandemic would be covered by such a provision.
While The Trump Organization has not yet asked the county to defer its rent payment on the golf course land, the question of whether the pandemic could be considered an act of God in the case of its contract with Palm Beach County takes on special significance, The Post reported, given that Donald Trump, in his role as United States President, is ultimately in charge of calling for an economic shutdown and, conversely, would be the one to end the nationwide business closures.
“This is a highly unusual situation, because you may have the tenant who is seeking relief in charge of protecting against the events upon which that tenant is complaining,” said West Palm Beach attorney Michael Gelfand, former chair of the Florida Bar’s Real Property, Probate and Trust Law Section and a fellow of the American College of Real Estate lawyers.
“There are so many permutations to this,” Gelfand said. “It’s a law school exam question.”
Real estate lawyers across the country have been discussing force majuere contract provisions for the past three weeks, Gelfand added. “Most of the players are trying to figure out how the parties in a relationship can come to a reasonable compromise so they can do business together in the future, because all this will pass,” he said.
And that seems to be what both the Trump Organization and the county want, The Post reported. In an e-mail response to Raymundo on March 31, Ray Walter, the Deputy Director of Real Estate and Concessions at the county’s department of airports, which owns the land, offered a preliminary opinion on the force majuere provision in the contract.
Under the county’s interpretation of the lease agreement, Walter indicated, the county would be “unable to forgive rental, but in certain situations airports may be able to defer rental on a short-term basis, in the midst of the current state of closure.”
Walter added that he expected “more direction in the coming days or weeks,” The Post reported. “We understand until the situation settles it may be premature to offer a specific proposal for resolution,” he wrote, adding that the Palm Beach County Commission would have the final say. “So please accept this as agreement with you that it is critical for us to keep the dialogue open.”
Raymundo arranged for the April rent payment to be made, The Post reported, and asked to be notified when the county had finalized its plans on handling the rent payments as the pandemic continues.
“We appreciate your continued cooperation and will continue to be in touch,” Raymondo wrote in an e-mail, The Post reported. “Best regards.”
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