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A dispute about rent could complicate the coming months for Western State College of Law as a planned purchaser of the school works to secure the necessary approvals.
Cal State Fullerton, which leases property to Western State in Irvine, said in a recent court filing that it has not been paid rent for the real estate since February. It also says it has not received the law school’s share of common area maintenance charges, known as CAM charges.
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CSU Fullerton wants the leased property at 1 Banting Drive returned to it as soon as possible.
The monthly rent for the law school’s campus is $114,546 and the CAM charges average $34,000 a month, according to CSU Fullerton.
The state school has been deducting the unpaid rent and CAM charges from Western State’s security deposit, but CSU Fullerton says those funds will be exhausted by next month.
CSU Fullerton also noted that Western State’s lease, which runs through January 2021, specifically prohibits the use of the security deposit for the payment of rent without the consent of CSU Fullerton.
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The state school places the blame for the rent issue on the receiver handling the federal receivership of Dream Center Education Holdings, which is the parent company for Western State’s parent university. The legal proceedings surrounding the receivership have been playing out in Ohio federal court.
CSU Fullerton filed a motion on June 5 requesting that the receivership be terminated effective immediately as to the real property the school owns housing Western State.
In the filing, CSU Fullerton also mentions the recently revealed potential for Westcliff University in Orange County to purchase Western State. Westcliff is a for-profit school offering undergraduate and graduate degree programs in business and education.
CSU Fullerton said Westcliff has indicated “that it is not willing to honor the remaining term of the lease between CSU Fullerton and the law school; instead, Westcliff University would like to negotiate a new lease with CSU Fullerton.”
CSU Fullerton said Westcliff proposed a short-term lease of five months at a lower rental rate as it works to secure approval of its planned law school purchase.
“If Westcliff were to receive the requisite approvals, it would then move the law school to its existing campus,” CSU Fullerton wrote. “This is why Westcliff is seeking a short-term lease instead of agreeing to honor the existing lease.”
But CSU Fullerton said it is not interested in leasing the property to Irvine-based Westcliff and ended all negotiations between the two sides.
“Given these facts, while Westcliff University may ultimately purchase the law school, the law school would not be operated at the property,” CSU Fullerton wrote in its filing.
Westcliff University’s planned purchase of Western State is not likely to be finalized until August 1 at the earliest.
In the receiver’s response to CSU Fullerton’s filing, he noted that the payments planned in July and August will cover the rent and CAM charges for those months.
Last week, the Ohio federal court sided with the receiver and brushed aside CSU Fullerton’s objections.
“One of the remaining goals of the receivership is to keep the law school open,” the court wrote in reference to Western State. “Unlike many of the landlords involved in this case, CSU Fullerton had a security deposit in place and has been able to apply it to cover expected rent payments and CAM charges during the receivership period.
“The receiver has budgeted limited resources to ensure that CSU Fullerton will continue to receive rent during the remaining months until the law school can be moved to a different location,” the court wrote. “Given the extenuating circumstances inherent in this case and the receivership’s remaining purposes, the court finds that CSU Fullerton’s limited objection is not well taken and is hereby overruled.”
While this round went in Western State’s favor, CSU Fullerton’s lack of interest in leasing the property to Westcliff for even a short time has the potential to cause problems down the line for the embattled law school.
Lyle Moran is a freelance writer in San Diego who handles both journalism and content writing projects. He previously reported for the Los Angeles Daily Journal, San Diego Daily Transcript, Associated Press, and Lowell Sun. He can be reached at [email protected] and found on Twitter @lylemoran.