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John Hageman, Forum News Service, Published January 13 2014

The Gap sues Grand Forks' Columbia Mall over lease agreement

GRAND FORKS - A lease dispute between an international clothing retailer and the owner of Columbia Mall has reached federal court.

The Gap alleges the ownership of Columbia Mall breached its lease agreement, stating in a court complaint that they owe the retailer at least $272,415 in “improperly collected” maintenance expenses over the past few years.

Fargo attorney Shanon Gregor filed the suit against Illinois-based GK Development Inc. and Columbia Grand Forks, LLC on Jan. 2 in U.S. District Court. Filings listed on the North Dakota Secretary of State’s website show Columbia Grand Forks has the same principal address as GK.

Gregor declined to comment, as did Marianne Fasano, a spokeswoman for GK.

“GK Development does not comment on pending litigation,” she wrote in an email.

According to the complaint, the Gap signed a lease in 2001 with Metropolitan Life Insurance Co., which owned the mall at the time. The final lease term sheet the two sides agreed to in late 2000 stated the Gap’s share of common area maintenance and heating, ventilation and air conditioning (HVAC) expenses were included in its rent, according to the complaint.

The Gap, which has more than 3,500 stores worldwide, opened in Columbia Mall in July 2001.

“Metropolitan never charged Gap for any common area maintenance or HVAC expense during the parties’ three-year course of performance,” the complaint states.

Common area maintenance is typically defined as costs a landlord incurs for upkeep of a commercial property. Examples can include snow removal and outdoor lighting.

The mall was sold to Columbia Mall Partners LLC in 2004, with GK managing the property. In 2005, mall ownership was transferred to Columbia Grand Forks LLC, according to the complaint.

The Gap extended its lease for five years in 2006 and in 2011, according to the complaint.

In the summer of 2011, however, GK and Columbia “demanded” that the Gap begin paying $5,535 in maintenance and HVAC expenses per month. The Gap paid the fees “out of an abundance of caution, including a back payment for common area maintenance and HVAC expenses allegedly owed for 2010,” the complaint states.

The Gap performed an independent audit in early 2013, which showed the payments were “improper under the lease.”

The Gap notified mall ownership in February 2013 that it planned to stop maintenance payments. GK officials said they would “instigate default procedures” if the retailer didn’t pay for maintenance, the complaint alleges.

“Because of this threat to its tenancy, Gap has been paying common area maintenance and HVAC expenses under protest since that time,” the complaint states.

The Gap is asking the court to declare that it has no obligation to pay for maintenance expenses, and is seeking damages and attorney fees. The case file on the District Court’s website indicates GK had not filed a response as of Monday afternoon.