Can a floor plan diagram create an implied warranty of specific occupancy in a lease? KBSquared v. Memorial Bldg. Explained

In KBSquared v. Memorial Bldg., the Utah Court of Appeals addressed whether a lease attachment’s reference to “seating area” created an implied warranty allowing high-occupancy use for dancing and jumping in a nightclub setting.

Background and Facts

KB Squared LLC operated a nightclub under a lease with Memorial Building LLC and used an upper-level bridge for premium concert seating. The bridge was originally designed to hold 50-60 people with fixed seating. However, Park City officials observed 85-100 people dancing and jumping on the bridge, causing excessive deflection. Officials issued a stop work order prohibiting occupancy until the issue was resolved. KB Squared sued Memorial, claiming Memorial breached the lease by failing to repair the bridge to accommodate KB Squared’s intended high-occupancy use.

Key Legal Issues

The central issue was whether the lease guaranteed KB Squared’s right to use the bridge for high-occupancy dancing and jumping. KB Squared argued that a floor plan diagram attached to the lease, which labeled the bridge as a “seating area,” constituted an implied representation that the space could accommodate their intended use. The court also addressed whether Memorial’s failure to upgrade the bridge constituted a breach of contract.

Court’s Analysis and Holding

The court of appeals affirmed the district court’s ruling. The court found the lease ambiguous and properly considered extrinsic evidence to determine the parties’ intent. The evidence showed the floor plan diagram was included only to identify square footage, not to guarantee specific occupancy or use. The lease contained no express representations about the bridge’s occupancy limits or permitted uses. Additionally, the lease included an “as is” provision and disclaimed prior representations. The court concluded that interpreting “seating area” to guarantee dancing and jumping for scores of people was “entirely unsupported and unreasonable.”

Practice Implications

This decision emphasizes the importance of express contractual provisions in commercial leases. Generic terms in floor plans or attachments will not create implied warranties for specific uses or occupancy levels. Practitioners should ensure that any critical operational requirements are explicitly stated in the lease terms rather than left to interpretation of diagrams or general language. The court’s analysis also reinforces that parties cannot rely on subjective understandings when the lease language does not support their interpretation.