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HomeMy WebLinkAbout[09a] Property Lease - 25 1st Ave NW Council Agenda Item 9a MEETING DATE: September 18, 2017 st AGENDA ITEM: Property Lease – 25 1 Ave SUBMITTED BY: Administration PREVIOUS COUNCIL ACTION: On June 25, 2017 the Council discussed the potential of leasing st the property known as the former Fire Hall – 25 1 Ave NW. BACKGROUND INFORMATION: Since the meeting in June, I have been approached by some Council members that they would like the matter placed back on the agenda as there was not enough information presented at the meeting. Further, a question has since arisen regarding the legality of the City renting property. Please find below additional information. The packet material also includes a proposed lease that addresses all the issues raised. It is the same lease that was used for Little Saints and the provisions that did not apply were removed and new specific provisions have been added that are site specific as well. For items discussed below, the lease reference has been included if applicable. From the information presented it appeared as though the City would be paying to lease the property. Concerns expressed included real estate taxes, insurance, and HVAC repairs.  Taxes – Item #5 requires the tenant to pay the real estate taxes. The Council Assessor has estimated the taxes to be approximately $ 2,800 and the first tax payment would not be until 2019 as the taxes are set for 2018 already.  Insurance – Item # 14 details the insurance requirement which were provided with assistance from the League of MN Cites and the City Attorney when the lease for Little Saints was executed. The terms were verified as still current today and applicable to the type of business. The City is not responsible for their contents and they have to provide liability insurance naming the city as an additional insured.  HVAC Repairs – Item #6 clarifies that the City is not obligated to replace the HVAC system in the event the system fails and cannot be repaired. The tenant will do repairs unless major.  Term/Rent – The term has been reduced to 3 years and the rent has been increased to reflect market rates. Questions regarding the legality of renting City space. In talking to the City Attorney the relevant MN Statutes include MN § 410.33 and MN § 412.211. Here is the essence of the statute based on the League of MN Cities information (direct text): Statutory cities have the power to lease land and buildings that are no longer needed for city purposes. Home rule charter cities often have similar authority in their city charters. Home rule cities whose charters are silent on this matter may use the authority given for statutory cities. A city has the right to let outside parties use the city building so long as the use does not interfere with the city’s purpose. A city can charge rent for the use of unneeded facilities because the income can lighten the burden of the taxpayers ATTACHMENTS: Draft Lease Agreement REQUESTED COUNCIL ACTION: Provide direction LEASE FOR SPACE Bad Habit Brewing, LLC The City of St. Joseph, a Minnesota municipal corporation with an address of 75 Callaway Street East, St. Joseph MN 56374 (“Landlord”), and Bad Habit Brewing, LLC, a Minnesota limited liability company, with an address of 15 MN St E; Suite 108 (“Tenant”), make this Lease effective as of October 1, 2017, the “Effective Date”. Witnesseth: The Landlord, in consideration of the rents and covenants hereinafter mentioned, does hereby demise, lease and let to the Tenant, and the Tenant does hereby hire and take from the Landlord, the following described premises (the premises), as hereinafter defined located in the City of St. Joseph, County of Stearns, and State of Minnesota, namely: st That portion of the former St. Joseph Fire Garage located at 25 1 Ave NW, St. Joseph, (“building”), consisting of approximately 2,178 square feet. 1. Term and Use. The have and to hold the premises for the purpose storing product for Bad Habit Brewing Company without any liability or obligation on the part of the landlord of making any alterations, improvements, or repairs of any kind on or about the premises except as otherwise provided herein for the term of three (3) years, from the 1st day of October, 2017, and continuing to and including st the 31 day of December, 2020, unless extended or sooner terminated as hereinafter provided. 2. Possession. Except as hereinafter provided, the Landlord shall deliver possession of the premises in the condition required by this lease on or before the date here above specified for commencement of the term, subject to unavoidable delays beyond the landlord’s control, but delivery of possession prior to such commencement date shall not affect the expiration date of this lease. If the premises shall not be available to the tenant for occupancy on the first day of the term, the landlord shall not be liable to the tenant for damages, but a pro rata part of the rent shall be abated until the premises are ready for occupancy. The taking of possession of the premises by the tenant shall be conclusive evidence that the premises were in the agreed condition at the commencement of the lease term. 3. Fixed Rent. The tenant agrees to pay to the landlord at the landlord’s office at 75 Callaway St E, St. Joseph MN 56374 or at such other place as the landlord may hereafter from time to time designate in writing, without demand, a fixed rent as illustrated on the following table, per month for each and every calendar month during the years prescribed below. Said rent shall be payable in advance on the first day of each month. 4. Additional rent. In addition to the fixed rent, the tenant shall pay as additional rental all monies required to be paid by the tenant as set forth in the balance of these provisions. Specifically, but not by the way of limitation, the reasonable value of any action taken or materials used by the landlord to correct or mitigate any obligations of this lease by the tenant shall be deemed additional rent and charged to the tenant, payable with the following month’s fixed rent payment. 5. Utilities and services. The tenant shall be responsible to pay utility expenses directly related to the premises including electric, gas, real estate taxes and water/sewer. The landlord shall not be liable for any damage for failure to furnish the services by reason of breakdowns, the necessity for repairs or improvements to the services, fires, explosion, strikes, or any cause beyond the landlord’s reasonable control, and no temporary interruption or failure of the services shall render the tenant liable to the landlord for damages by abatement of rent or otherwise. The tenant shall provide janitorial service for the rented premises and maintain the premises in a clean condition. During the lease term, the premises shall be maintained to the same level of care as they were on the first day of the lease. 6. Maintenance and Repairs. The Landlord shall maintain the building structure including the slab floor, exterior walls and the roof. The Tenant shall maintain the interior of the premises and the HVAC units, provided however, if any major component of the HVAC units requires replacement during the lease term the Landlord shall make such replacements; however, if the HVAC needs to be replaced, the Landlord shall review the feasibility of such repair and will not be obligated to replace the unit. 7. Care of premises. The tenant agrees: (a) to keep the premises in as good condition and repair as they were in at the time that the tenant took possession, reasonable wear and tear and damage from fire and other casualty for which insurance is normally procured; (b) to keep the premises in a clean and sanitary condition; (c) to not commit any nuisance or waste on the premises, throw foreign substances in plumbing facilities, or waste any of the utilities furnished by the landlord; (d) that all signage, including any placed on exterior windows of the premises, shall be displayed with only the consent of the landlord; (e) to properly dispose of waste; and (f) to properly dispose of any unwanted materials no later than the determination date of the lease. 8. Unlawful Use. The tenant agrees not to commit or permit any act on the premises that would be in violation of any statute, regulation, or ordinance of any government body, or that would increase the insurance rate on the building, or that would be in violation of any insurance policy carried on the premises by the landlord. 9. Landlord’s access. The landlord, its employees, and its agents shall have the right to enter the premises at all reasonable times for the purpose of inspecting, cleaning, repairing, altering, or improving the premises or the building. Nothing in this paragraph shall be interpreted as requiring the landlord to perform any such acts independent of the requirements of the other provisions of this lease. The landlord shall also be permitted to enter the premises for the purpose of posting notices of non- responsibility for alterations, additions, and repairs. 10. Alterations. The tenant shall not make any alterations, additions, or improvements in or to the premise or add, disturb, or in any way change any plumbing or wiring therein without the written consent of the landlord as to the character of the alternation, additions, or improvements to be made, the manner of doing the work, the persons to do the work, the providing of costs therefor, and the returning of the premises to the condition they were in at the commencement of this lease. However, the tenant shall be permitted to change the color of any sheetrock walls; provided the landlord approves the painter to perform any such work and all costs shall be the responsibility of the tenant. Any approved alternations will be done at the tenant’s sole expense. The Landlord understands and agrees the leased premise is to be used for producing and storing beer. Tenant may request future alterations to accommodate the intended use and the landlord shall not unreasonably withhold approvals of such alternations. 11. Assignment or subletting. The tenant may not assign or hypothecate this lease or sublet the premises or any part thereof, whether by voluntary act, operation of law, or otherwise, without the prior written consent of the landlord in each instance. Consent by the landlord to one assignment of this lease or to one subletting of the premises shall not be a waiver of the landlord’s rights under this lease as to any subsequent assignment or subletting. The landlord’s rights to assign this lease are and shall remain unqualified. No assignment shall release the tenant of any of its obligations under this lease. If the tenant is a corporation, any transfer of this lease through merger, consolidation, corporate reorganization, or liquidation, or any transfer, hypothecation, or other change in the ownership of the shares of voting stock of the tenant resulting in a change of the present effective voting control of the tenant by these persons or entities owning a majority of shares on the date of this lease, shall constitute an assignment of this lease requiring prior written consent of the landlord. 12. Damage by fire or other casualty. If fire or other casualty shall render the premises untenantable, this lease shall terminate forthwith, and prepayments of rent shall be refunded by the landlord pro rata; provided, however, that if the premises can be repaired within ninety (90) days from the date of such event, then at the landlord’s option, by notice in writing to the tenant, mailed within thirty (30) days after such damage or destruction, this lease shall remain in full effect, but the rent for the period during which the premises are untenantable will be abated pro rata. 13. Insurance. Tenant, at its sole cost and expense, will carry and maintain in full force an effect during the Lease’s entire Term, the following insurance: 13.1 Liability Insurance. Commercial general liability insurance, providing coverage for an "occurrence" rather than a "claims made" basis, including coverage for Bodily Injury, Property Damage, Personal Injury, Contractual Liability (applying to this Lease), and Independent Contractors, in current Insurance Services Office Form or other form which provides coverage at least as broad. Tenant will maintain a combined policy limit of at least $1,500,000 per occurrence and $2,000,000 general aggregate applying to Bodily Injury, Property Damage, and Personal Injury, which limit may be satisfied by Tenant's basic policy, or by the basic policy in combination with umbrella or excess policies so long as the coverage is at least as broad as that required in this Lease. Landlord will be named as an additional insured under all such policies. 13.2 Insurance Certificate. At least ten (10) days before the Commencement Date, Tenant will deliver to Landlord evidence that the insurance required by this Lease is in full force and effect. At least ten (10) days before the expiration of any insurance coverage this Lease requires, Tenant will deliver evidence that the coverage in question will be renewed or replaced upon expiration. All evidence of insurance will contain sufficient information to enable Landlord to determine whether Tenant's insurance complies with this Lease's requirements. Upon request, Tenant will also furnish to Landlord certificates of insurance for all pertinent policies. All of Tenant's insurance policies used to provide the coverage this Lease requires will (a) be endorsed to require the insurer to provide at least thirty (30) days written notice to Landlord before cancellation, expiration, material modification, or non-renewal, and (b) be issued by financially sound companies qualified to do business in Minnesota and reasonably acceptable to Landlord. 13.3 Landlord’s Insurance. Landlord will carry in full force and effect the following insurance during the Term: A. Property Insurance. "All risk" property insurance covering the full replacement value of the Premises, exclusive of Tenant's leasehold improvements and any binders currently required by Tenant's insurance company. B. Liability Insurance. Commercial general public liability insurance or its equivalent covering the Premises, in a combined single limit amount of at least $1,000,000, and written on “claims-made” basis. 13.4 Worker’s Compensation Insurance. Tenant will keep in full force and effect during the Term, at its sole cost and expense, workers compensation insurance to the extent and in the amounts required by Minnesota law. 13.5 Waiver of Subrogation. Landlord and Tenant mutually release each other from liability and waive all right of recovery against each other for any loss or damage to the Premises, or its contents to the extent the loss or damage is covered by insurance maintained by each respective party whether or not the required insurance is actually maintained. This release and waiver applies to any loss or damage from any cause whatsoever, including, without limitation, the negligence of the other party, its occupants or permittees, and will also apply to the extent of any deductible maintained by a party under its insurance policies. This Section will be inapplicable if it would have the effect, but only to the extent it would have the effect, of invalidating any insurance coverage of Landlord or Tenant. 13.6 Risk of Loss. Notwithstanding anything apparently to the contrary in this Lease, Landlord and its partners, officers, employees and agents will not be liable to Tenant, and Tenant releases such parties from all damage, compensation or claims from any cause other than the intentional misconduct of Landlord or its partners, officers, employees or agents arising from: loss or damage to personal property or trade fixtures in the Premises including books, records, files, computer equipment, computer data, money, securities, negotiable instruments or other papers; lost business or other consequential damage arising out of interruption in the use of the Premises; and any criminal act by any person other than Landlord or its partners, officers or employees. 13.7 Insurance on Tenant's Personal Property. Any insurance policy on Tenant's personal property will be payable solely by Tenant and will contain a waiver of subrogation rights against Landlord. Landlord will have no obligation to insure Tenant's personal property. 14. Eminent domain. If the entire premises are taken by any public authority under the power of threat or eminent domain, then the term of this lease shall cease as of the day possession shall be taken by such public authority, and the landlord shall make a pro rata refund of any rent that may have been paid in advance. In the event that less than the entire building is so taken and taken that the premises are not in the portion of the building so taken and provided the premises are not rendered untenantable thereby, then this lease shall terminate only at the option of the landlord. In the event that only a port of the premises is so taken and that this lease does not so terminate, there shall be a pro rata reduction in rent, and all other terms and provisions hereof shall remain in full effect. All damages awarded for such taking shall belong to and be the property of the landlord, irrespective of the basis on which they are awarded. 15. Surrender. On the last day of the term of this lease or sooner termination thereof, the tenant shall peaceably surrender the premises in good condition and repair, reasonable wear and tear excepted, consistent with the tenant’s duty to make repairs as provided in paragraph 7 of this lease. On or before the last day of the term of this lease or its sooner termination, the tenant shall at its expense remove all of its equipment from the premises, and any property not removed shall be deemed abandoned. All alterations, additions, and fixtures other than the tenant’s equipment which have been made or installed by either the landlord or tenant on the premises shall remain as the landlord’s property and shall be surrendered with the premises as a part thereof. If the premises are not surrendered at the end of the term or its sooner termination, the tenant shall indemnify the landlord against loss or liability resulting from delay by the tenant in so surrendering the premises, including without limitation claims made by any succeeding tenant founded on such delay. The tenant shall promptly surrender all keys for the premises to the landlord at the place then fixed for payment of rent and shall inform the landlord of combinations on any locks and safes on the premises. In no event shall the tenant be deemed to have abandoned the premises or the lease during the terms hereof, unless the tenant first obtains the express permission of the landlord. The provision of this paragraph 16 shall survive the termination of this lease. 16. Holding over. In the event the tenant remains in possession of the premises after the expiration of this lease with the permission of the landlord without execution of a new lease, it shall be deemed to be occupying the premises as a tenant from month to month, subject to all the conditions, provisions, and obligations of this lease insofar as they can be applicable to a month-to-month tenancy. 17. Nonpayment of rent; defaults. On the occurrence of any of the following: (a) a rent payment from the tenant to the landlord shall be and remain unpaid in whole or part for more than ten (10) days after it is due and payable; (b) the tenant shall violate or default any of the other covenants, agreements, stipulations, or conditions herein, and such violation or default shall continue for a period of ten (10) days after written notice from the landlord of such violation or default; or (c) if the tenant shall be adjudged bankrupt or file a petition in bankruptcy or for any arrangements under the bankruptcy code or become insolvent or have appointed a receiver of its property; then it shall be optional for the landlord to declare this lease forfeited and the terms ended and to reenter the premises with or without process of law using such force as may be necessary to remove all persons or chattels therefrom, and the landlord shall not be liable for damage by reason of such reentry or forfeiture. Notwithstanding reentry by the landlord or forfeiture or termination of this lease, the liability of the tenant for the rent provided for herein shall not be relinquished or extinguished for the balance of the term of this lease. 18. Security interest. The tenant hereby grants to the landlord a security interest in all goods, chattels, fixtures, and personal property belonging to the tenant which now are or may hereafter be placed in the premises to secure all rents due hereunder and all other covenants and obligations of the tenant hereunder. In the event that there exists any security interest in the property which is paramount and superior to the security interest herein created, the landlord may satisfy the paramount security interest, and all sums paid in satisfying the security interest will be considered additional sums owed the landlord by the tenant. The tenant hereby acknowledges receipt of a true, full, and complete copy of this lease. The landlord, in the event of a default by the tenant of any covenant or condition herein contained, may exercise (in addition to any rights and remedies herein granted) all the rights and remedies of a secured party under the Uniform Commercial Code or any other applicable law. 19. Covenants to hold harmless. Except in the case of negligence of the landlord, it agents, or its employees, the tenant agrees to save, hold harmless, and defend the landlord for any liability for damages to any person or property in or about the premises. The landlord shall not be liable to the tenant, its agents, employees, representatives, customers, or invitees for any personal injury, death, or damage to property caused by theft, burglary, water, gas, electricity, fire, or for any other cause occurring on or about the premises. All property kept, stored, or maintained in the premises shall be so kept, stored, or maintained at the sole risk of the tenant. 20. Mechanic’s liens. The tenant hereby covenants and agrees that the tenant will not permit or allow any mechanic’s or materialman’s liens to be placed on the landlord’s interest in the premises during the term hereof. Notwithstanding the previous sentence, however, in the event any such lien shall be so placed on the landlord’s interest, the tenants shall take all steps necessary to see that it is removed within thirty (30) days of its being filed; provided, however, that the tenant may contest any such lien provided the tenant first posts a surety bond in favor of and insuring the landlord in an amount equal to 125% of the amount of any such lien. 21. Subordination. The tenant agrees that at the tenant’s election this lease shall be subordinate to any land lease, mortgages, or trust deeds now on or placed on the premises or building and to any and all advances to be made thereunder, and to the interest thereon, and to all renewals, replacements, and extensions thereof. The tenant hereby appoints the landlord as its attorney-in-fact to execute such documents as may be required to accomplish such subordination. 22. Brokerage fees. Each party hereto warrants that it has not incurred any real estate brokerage fees, finders’ fees, loan brokerage fees, or any other fees to any third party in connection with this lease. 23. Building signage. The tenant shall be permitted to place a dignified sign containing the tenant’s name on the door to the premises, the size and design of which shall be subject to the landlord’s approval. 24. Keys. The land lord will provide the tenant with keys to the premises as of the date of the commencement of this lease. 25. No partnership, joint venture, or fiduciary relationship created hereby. Nothing contained in this lease shall be interpreted as creating a partnership, joint venture, or relationship of principal and agent between the landlord and the tenant, it being understood that the sole relationship created hereby is one of landlord and tenant. 26. Cumulative Rights. No right or remedy herein conferred on or reserved to the tenant or the landlord is intended to be exclusive of any other right or remedy provided by law, but each shall be cumulative in and in addition to every other right or remedy given herein or elsewhere or hereafter existing at law or in equity or by statute. 27. Reasonable consent. Wherever the landlord’s or the tenant’s approval or consent shall be required herein, such approval or consent shall not be arbitrary or unreasonably conditioned, delayed, or withheld and shall be deemed to have given unless within twenty (20) days of request therefor the landlord or tenant, as appropriate, gives notice to the requesting party that the landlord and tenant, as appropriate, is denying such approval or consent, staling in such notice the reasonable grounds thereof. 28. Attorney’s fees. If any action at law or in equity shall be brought in court to recover any rent under this lease or for or on account of any breach of or to enforce or interpret any of the covenants, terms, or conditions of this lease or for the recovery of the possession of the premises, the prevailing party shall be entitled to recover from the other party as part of the prevailing party’s costs its reasonable attorney’s fees, the amount of which shall be fixed by the court and shall be made a part of any judgement or decree rendered. 29. Notices. Any notice required or permitted to be given by any party upon the other is given in accordance with this lease when it is (a) delivered personally to an office of a party, (b) deposited in a sealed wrapper in the United States mail, postage, prepaid, (c) deposited cost paid with a nationally recognized, reputable overnight courier, or (d) faxed or emailed, provided an original is personally delivered or deposited as provided herein, properly addressed as follows: If to Landlord: If to Tenant: City of St. Joseph Bad Habit Brewing LLC 75 Callaway St E 15 MN St E; Suite 108 St. Joseph MN 56374 St. Joseph MN 56374 Notices will be deemed effective on the earlier of the date of receipt or the date of deposit as aforesaid; provided, however, that if notice is given by deposit that the time for response to any notice by the other party will commence to run one business day after any such deposit. Any party may change its address for the service of notice by giving written notice of such change to the other party, in any manner above specified, five (5) days prior to the effective date of such change. 30. Successors and assigns. The lease shall be binding on and shall inure to the benefit of the parties hereto and their respective assigns, executors, heirs, personal representatives, and successors. 31. Further assurances. In addition to any other information which may reasonably be requested, either party shall without charge, at any time and from time to time hereafter, within ten (10) days after written request, certify by written instrument duly executed and acknowledged to any person, firm, or corporation specified in such request: (a) Whether this lease has been supplemented or amended, and if so, the substance and manner of such supplement or amendment; (b) The validity and face and effect of this lease, in accordance with its tenor as then constituted; (c) The existence of any default thereunder; (d) The existence of any offsets, counterclaims, or defenses thereto on the part of such other party; and (e) The commencement and expiration dates of the term of this lease. Any such certificate may be relied on by the party who requested it and by any other person, firm or corporation to whom it may be exhibited or delivered, and the contents of such certificate shall be binding on the party executing it. 32. Amendment, modification, or waiver. No amendment, modification, or waiver of any condition, provision, or term of this lease shall be valid or of any effect unless made in writing, signed by the party or parties to be bound, or its duly authorized representative, and specifying with particularity the extent and nature of such amendment, modification, or waiver. Any waiver by any party shall not affect or impair any right arising from any subsequent default. 33. Severable provisions. Each provision, section, sentence, clause, phrase, and work of this lease is intended to be servable. If any provision, section, sentence, clause, phrase, and word hereof is illegal or in valid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of this lease. 34. Entire agreement. This lease contains the entire understanding of the parties hereto with respect to the transactions contemplated hereby and supersedes all prior agreements and understandings between the parties with respect to the subject matter. No representations, warranties, undertakings, or promises, whether oral, implied, written, or otherwise, have been made by either party hereto to the other unless expressly stated in this lease or unless mutually agreed to in writing between the parties hereto after the date hereof, and neither party has relied on any verbal representations, agreements, or understandings not expressly set forth herein. 35. Captions, headings, or titles. All captions, headings, or titles in the paragraphs or sections of this lease are inserted for convenience of reference only and shall not constitute a part of this lease as a limitation of the scope of the particular paragraphs or sections to which they apply. 36. Reference to gender. When appropriate, the feminine gender may be read as the masculine gender or the neuter gender; the masculine gender may be read as the feminine gender or the neuter gender; and the neuter gender may be read as the masculine gender or the female gender. 37. Minnesota Law. This lease shall be constructed and enforced in accordance with the laws of the State of Minnesota. In witness whereof, the parties hereto have executed this lease the day and year first above written. LANDLORD: TENANT City of St. Joseph Bad Habit Brewing LLC By: By: Its: Its: