Can a tenant be required to quiet title under a lease agreement? Holladay Towne Center v. Brown Family Holdings Explained

In Holladay Towne Center v. Brown Family Holdings, the Utah Supreme Court addressed whether a tenant under a ground lease could be contractually required to quiet title to remove an undisclosed easement affecting the leased property.

Background and Facts

Holladay Towne Center (HTC) entered into a 20-year ground lease with Brown Family Holdings to develop a shopping center, with an option to purchase after five years. Both parties had received clear title reports before executing the lease. However, after the lease was signed, HTC requested a third title report that revealed an undisclosed easement for parking, ingress, and egress benefiting an adjacent lot. This easement prevented HTC from obtaining financing for development. When HTC demanded Brown cure this title defect, Brown refused, leading to litigation.

Key Legal Issues

The case presented two primary questions: (1) which party bore responsibility under the lease to quiet title when an undisclosed easement was discovered, and (2) whether a tenant has standing to bring a quiet title action. The lease contained no express warranty that the property was free of encumbrances but included broad language requiring HTC to pay “all impositions and costs relating to the property.”

Court’s Analysis and Holding

The Utah Supreme Court analyzed the lease’s triple net provisions and “Compliance with Laws” clause, which required the tenant to address “all covenants, restrictions, and conditions now or hereafter of record.” The court found that Brown had conveyed only the interest it possessed, similar to a quitclaim deed, without warranting clear title. The lease’s broad cost allocation language requiring HTC to pay “all impositions and costs relating to the property” extended beyond typical use-related expenses to include title-clearing costs. Regarding standing, the court held that HTC’s present possessory interest and purchase option provided sufficient interest under Utah’s quiet title statute, which permits “[a] person” to bring actions to determine “rights, interests, or claims” in real property.

Practice Implications

This decision demonstrates that courts will broadly interpret cost allocation provisions in commercial leases. Practitioners representing tenants should carefully review all expense allocation language and consider negotiating specific exceptions for title-related issues. For landlords, the decision confirms that triple net leases can effectively shift title-clearing responsibilities to tenants when properly drafted. The court’s standing analysis also clarifies that tenants with substantial leasehold interests, particularly those with purchase options, have sufficient interest to pursue quiet title actions.