License Agreement Granting Use of Commercial Property Was Not a Lease and Therefore Not Subject to Landlord-Tenant Laws

License Agreement Granting Use of Commercial Property Was Not a Lease and Therefore Not Subject to Landlord-Tenant Laws 

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Summary

The dispute in Castaic Studios v. Wonderland Studios centered on the interpretation and enforcement of a commercial property agreement, highlighting critical distinctions between the law governing commercial lease agreements and license agreements.  Because the agreement in the case was governed by contract law, not landlord-tenant law, the owner of the commercial property was barred from bringing an unlawful detainer action against the licensor to regain possession.

Background

Castaic Studios, LLC (“Castaic”), the owner of a commercial property in Castaic, California, entered into a “License Agreement” with Wonderland Studios, LLC (“Wonderland”) in October 2021. The agreement granted Wonderland an exclusive, non-possessory right to use certain areas of the property, excluding a stage area and storage building.  The agreement specified that it was a license agreement, not a lease, with Castaic retaining legal possession and control of the premises.  The agreement also provided that it would be governed by contract law rather than by landlord-tenant law​​.

In July 2022, Wonderland defaulted on the agreement’s terms.  Castaic filed an unlawful detainer action in an attempt to regain possession.  The court, noting that the agreement was governed by contract law and not landlord-tenant law, sustained Wonderland’s demurrer to the complaint.  The court held that Castaic could not pursue an unlawful detainer action under the license agreement because the agreement was not a lease and Castaic waived the right to bring such an action.  (California Court of Appeal, Second Appellate District, affirming Los Angeles County Superior Court’s ruling.)  

Key Takeaways

  • The case underscores the importance of clear contract language for all commercial property agreements.
  •  The court reaffirmed the fundamental goal of contract interpretation: to give effect to the mutual intention of the parties as it existed at the time of entering into the contract.  If the language of the agreement is clear and explicit, the intent is determined by reference to the language.  Parties are permitted to waive and to contract away rights they otherwise may have retained.

Castaic Studios, LLC v. Wonderland Studios, LLC (2023) 97 Cal.App.5th 209