The nonprofit Mission Inn Foundation filed suit against the Historic Mission Inn Corp. Oct. 27 in an attempt to maintain their tenancy at Riverside’s historic hotel. The Corporation had sent the Foundation a 30-day notice to vacate their rented property on Sept. 29. The company argues that the existing lease is legally impossible to renew, and that the Foundation rejected attempts to negotiate new leases. The Foundation argues that the existing lease can be renewed, and that they renewed it in time.
Ownership history
The Foundation was incorporated in 1976, with attorney Arthur Littleworth as the founding president. At the time, the Mission Inn was owned by Riverside’s Redevelopment Agency.
Jarod Hoogland is the current executive director, and Karl Hicks is the current president. During the 1970s, when the Riverside RDA owned the hotel, the Foundation ran operations and rented out rooms as apartments and student housing.
Ownership of the Mission Inn went into private hands in the 1980s, and the Foundation began cataloging the hotel’s artifacts and conducting tours, Hoogland said.
The Foundation has rented part of the Mission Inn Hotel, as a museum, since 1992. They also provide tours of the Mission Inn, maintain the hotel’s artifacts and artworks, and run the Mission Inn Run and the Hands on History outreach program.
“We’re a key component, we’re the carryover of the community’s interest and trust in this location. The community is what came together to save the hotel, and the Foundation is what was birthed as part of that,” Koogland said.
The Corporation was incorporated in 1992, and is the current owner of the hotel. Duane Roberts is the Corporation’s current chief executive officer and secretary. The Corporation bought the hotel from the Riverside RDA.
RDAs
The state of California established redevelopment agencies in 1945, according to the U.S. Department of Housing and Urban Development. They were created to develop areas of cities that had fallen into disrepair. California legislators shut down the state’s redevelopment agencies in 2011 with Assembly Bill 26, according to HUD. To make sure that redevelopment agency programs were shut down properly and over time, AB 26 established cities as the successors to redevelopment agencies, but established that cities could not extend leases the RDAs entered into.
In this case, the RDA was succeeded by the city of Riverside.
At issue
The Foundation argues that they, as the true beneficiary of the lease, can renew the lease even though they had sub-rented it from the RDA.
“The (RDA) was not contemplated as the actual beneficiary of the Lease. Rather… the Lease would be made for the Foundation’s benefit in that the Foundation, not the (RDA), would enjoy the use of the Museum and associated premises and incur all of the obligations to the Corporation,” their complaint reads.
The Corporation argues that Riverside (the RDA) was the tenant, and that there was no legal ground to renew the lease.
“The Foundation has no greater right to maintain in possession of the premises than does the tenant under the lease, the City. As previously indicated, the City, as tenant, is prohibited by law from extending the term of the lease, and the Foundation, as subtenant, has no contractual or lawful basis to attempt to independently exercise the option (to renew), as the foundation’s rights under the sublease are derived solely and exclusively from the rights of the city under the lease,” a July 11, 2022 letter from Roberts’ lawyer to the Mission Inn Foundation reads.
Multiple contracts
The issue is complicated by the number of agreements made between the Foundation, the Corporation, and the RDA.
The RDA and the Corporation entered into a Dec. 23, 1992, disposition and development agreement in which the RDA would sell the Mission Inn to the Corporation.
The RDA agreed to provide $5.5 million to the Corporation to pay off debts held by Roberts. and to refurbish the Mission Inn, according to the Foundation’s complaint.
One term of the lease was that the Corporation would make 3,500 square feet of office and museum space available to the Foundation. The RDA agreed to pay $1.26 million upfront to cover $77,100 in annual rent for 30 years.
The Foundation, under the agreement, would be given two 10-year options to extend for the nominal rent of $1.
“(The Corporation) will lease the above space to the (RDA) or its designee,” the agreement reads.
The Foundation entered into a lease Dec. 22, 1992. The lease labels the agency as the tenant, and the Foundation as a sub-tenant:
“The Historic Mission Inn Corporation (‘Developer’), a California corporation, owner of the Mission Inn, is leasing certain space to the City of Riverside Development Department (‘Agency’) and the Agency is thereafter subletting said space to the Mission Inn Foundation.”
“(The Agency) shall have the right to extend the term of this Lease with respect to the Foundation Main Space and the Museum Main Space, only for two (2) additional ten (10) year period(s) (each, an ‘extension term’) under the same terms and conditions as the original lease (except for Minimum Rent as provided below). It is understood that this option is unique to (The Agency) and (The Foundation). Upon any assignment or subletting, other than as specifically provided in Article XIV hereof, with or without (The Corporation’s) consent, this option shall be rendered null and void.”
A Dec. 22, 2000, lease agreement between the Corporation and the RDA established that the RDA was subletting the space to the Foundation, and so did a Jan. 29, 2001, sublease agreement between the RDA and the Foundation.
Conflict
The Foundation wrote the Corporation to renew the lease on May 26, 2022. The July 11 response said that the lease could legally not be renewed.
Riverside had attempted to renew the lease Dec. 31, 2022, but was denied permission from the state due to the prohibition on renewing RDA leases, according to the city in an Oct. 19 press release.
The Corporation issued a statement Oct. 26 saying the city had notified them in April 2022 that the lease could not be renewed.
Case information
Riverside Superior Judge O.G. Magno is assigned to the case.
Kevin K. Randolph, Daniel C. Stein and Matthew C. Maler of Fennemore LLP represent the Mission Inn Foundation.
Case No. CVRI2305781
Read the complaint here.
