This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2000).






Bureau of Collection Recovery, Inc.





Eden West Partners L.L.C., et al.,



Filed July 17, 2001


Amundson, Judge


Hennepin County District Court

File No. 99-11114


Brian M. Sund, Robert Y. Kehoe, Morrison & Fenske, 5125 County Road 101, Suite 102, Minnetonka, MN 55345 (for respondent)


Thomas H. Boyd, Winthrop & Weinstine, 3200 Minnesota World Trade Center, 30 East Seventh Street, St. Paul, MN 55101 (for appellants)


Considered and decided by Amundson, Presiding Judge, Foley, Judge,* and Huspeni, Judge.*

            U N P U B L I S H E D  O P I N I O N


After a court trial in this lease dispute, the district court found that a landlord could not include the cost of real estate taxes to calculate a tenant's rent where the rent was based on the landlord's base operating costs.  We affirm.


            On September 18, 1996, Bureau of Collection Recovery, Inc. (BCR) executed a lease with C.H. Robinson Co. (Robinson) for rental of office space in a building in Eden Prairie, Minnesota that Robinson owned.

The lease contained a provision for determining rent predicated, in part, on “base operating costs.”  These costs were estimated at $5 per square foot for the first year, $5.10 for the second and third years, and $5.25 for the remainder of the six-year lease.  However, “base operating costs” were to be computed using “currently established generally accepted accounting practices” and excluded “items classified as ‘Capital’.”  The lease specifically provided that the landlord would furnish heating, ventilation, and air conditioning; lavatory services; electricity; elevator services; and janitorial services and that the cost of those services would be included in operating costs.

During the leasing negotiations, BCR's counsel advised BCR to negotiate a modification to the lease to explicitly exclude certain expenses (including real estate taxes) from the costs used to determine the base rent.  This proposal was not included in the final lease.  However, during negotiations, Robinson's representative assured BCR's representative that real estate taxes were not being passed through to BCR as part of the rent.

            Initially, BCR paid only the base operating costs as specifically provided in the lease and BCR was not required to reimburse the landlord for real estate taxes or management fees.  In August 1998, Robinson sold the building to Eden West Office Building Co. (Eden West), who added real estate taxes and management fees to the base operating costs.  Eden West also informed BCR that its operating costs had increased and raised the rent from $5.25 per square foot to $8.43.  BCR refused to pay the increased rent, alleging that using real estate taxes and maintenance fees to determine “basic operating costs” violated the terms of the lease. 

BCR filed a complaint for a declaratory judgment to determine its legal obligations for rent under the lease. While the case was pending, Eden West sold the property to William J. Hargis (Hargis) in January 2000.  After a court trial, the district court entered judgment in BCR's favor and this appeal followed.


            Where a contract is unambiguous, its construction and effect presents a question of law.  Trondson v. Janikula, 458 N.W.2d 679, 681 (Minn.1990).  The purpose of construing a contract is to “give effect to the intention of the parties as expressed in the language they used in drafting the whole contract.”  Art Goebel, Inc. v. North Suburban Agencies, 567 N.W.2d 511, 515 (Minn. 1997) (quotation omitted).  We give the language in a contract its plain and ordinary meaning, Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 67 (Minn. 1979), and read its terms in the context of the entire contract.  Kaufmann Stewart v. Weinbrenner Shoe Co., 589 N.W.2d 499, 502 (Minn. App. 1999).

All parties agree that BCR's rent under the lease is set by the landlord's “base operating costs.”  The lease does not define base operating costs, but specifically provides that the cost of heating, cooling, and electricity as well as lavatory, elevator, and janitorial services are to be included in “base operating costs.”  The lease also excludes items classified as capital from “base operating costs.” 

The district court concluded that the lease was unambiguousand included no provision or language that allows or permits real estate taxes to be passed through to the tenant.  We agree.  The term “base operating costs” refers to costs arising out of the use of the property.  All of the items listed in the lease included within operating costs result from the use of the property, not from the ownership of the property.  The obligation to pay taxes on the property does not arise from the property's use, but rather its ownership.  Regardless of whether the landlord has a tenant in the building using the premises, real estate taxes are levied on the property.  Thus, “base operating costs” do not include real estate taxes. 

We find unpersuasive Eden West and Hargis's argument that because Minn. Stat. § 256B.421, subd. 8 (2000) defines “operating costs” as including real estate taxes, that definition should apply here as a matter of law.  Minn. Stat. § 256B.421 does not set out a general principal of law.  Rather, it sets up a mechanism for determining the costs of nursing facilities to determine rate adjustments. 

Eden West and Hargis also contend that the integration clause in the contract bars BCR from demonstrating with extrinsic evidence that real estate taxes were to be excluded from base operating costs.  Although when a contract is a complete integration, parole evidence will not be admitted to prove any other agreement or term that would be within the scope of the contract, Stromberg v. Smith, 423 N.W.2d 107, 109 (Minn. App. 1988), no such evidence is needed here.  No clause exists which allows the landlord to pass through the costs of real estate taxes to the tenant. 

Real estate taxes are charged against the property on which they are levied and, if unpaid, will provide the basis for a lien on the property State v. Barrett & Zimmerman, 228 Minn. 96, 99, 36 N.W.2d 590, 593 (1949).  Real estate taxes are therefore the responsibility of the property owner.  Although this cost may be passed onto a tenant, the lease must expressly so provide.  Here, the lease here did not explicitly provide for BCR to pay real estate taxes and no other term allowed Eden West or Hargis to use these costs to calculate BCR’s rent.

Because appellants did not raise or brief the issue of whether maintenance fees are included in the definition of “base operating costs,” we do not address that issue.  Melina v. Chaplin, 327 N.W.2d 19, 20 (Minn. 1982) (issues not briefed on appeal are waived).


* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, §10.