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Oral Agreements for a Commercial Lease



In a recent decision that holds importance for California landlords and tenants, the 65283 Two Bunch Palms Building LLC v. Coastal Harvest II, LLC case presented unique challenges and revelations. The case centered on Two Bunch, who orally leased an industrial building in Desert Hot Springs to Coastal Harvest for the indoor cultivation of cannabis.


After two years of unsuccessful negotiations over a written lease and a master service agreement, Two Bunch served Coastal Harvest with a 30-day notice to quit. When Coastal Harvest refused to vacate, Two Bunch initiated an unlawful detainer action, leading to a one-day trial and a judgment in favor of Two Bunch, including $180,000.13 in holdover damages.


Coastal Harvest attempted to argue their position based on two presumptions related to "agricultural" purposes and "agricultural lands," as per Civil Code section 1943 and Code of Civil Procedure section 1161, subdivision 2. However, Two Bunch effectively countered this argument with evidence that the oral lease was month-to-month unless a written lease was agreed upon.


This decision reiterates the Unlawful Detainer Act's purpose, which governs disputes between landlords and tenants about rightful possession of real property. Unlawful detainer actions are designed to provide a swift resolution for possession recovery and generally focus only on the issue of right to possession, excluding other related claims.


It's crucial to remember that the general presumption under Civil Code section 1943 is that an oral lease is month-to-month. Evidence demonstrating the parties' intention to agree to a longer term can rebut this presumption. However, the trial court found in favor of Two Bunch, establishing that Coastal Harvest failed to rebut the month-to-month lease presumption under Civil Code section 1943.


Furthermore, the trial court ruled that the indoor cannabis cultivation by Coastal Harvest did not qualify as "agricultural use." The operation was conducted in a large industrial building using movable pots, not traditional ground cultivation. This distinction led the court to conclude that the agricultural use presumptions under Civil Code section 1943 and Code of Civil Procedure section 1161, subdivision 2, were inapplicable.


The appellate court upheld the trial court's ruling. The trial court correctly concluded that Coastal Harvest did not rebut the general presumption of a month-to-month lease under Civil Code section 1943. Additionally, even if Coastal Harvest’s cannabis operation was considered “agricultural” use of the property, Two Bunch successfully rebutted the presumption of a one-year tenancy under section 1943.


The key lessons to take away from this case are:


The general presumption under Civil Code section 1943 is that an oral lease is month-to-month.


For the purposes of section 1943, the parties' intention is the controlling factor, and evidence supporting their agreement to a longer term can rebut the general presumption of a month-to-month term for an oral lease.


The Unlawful Detainer Act governs disputes between landlords and tenants over the right to possess real property. It is a summary proceeding designed to provide an expedient remedy for recovering possession of real property.


Unlawful detainer actions generally only deal with the issue of right to possession, and not other claims between the parties, even if related to the property.


This landmark decision underscores the importance of clear lease agreements and the potential implications of California's legal codes on property disputes.

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