Art City Center v. Gap: $1.3M Verdict in Lease Holdover Case

Case Background

The legal dispute involved a large commercial property located at 1360 East 6th Street in Los Angeles. Art City Center LLC owned the 57,000-square-foot facility and entered into a lease agreement with the global retailer Gap, Inc. in April 2021. The retailer originally intended to use the space for a specific short-term project, leading to an initial one-year term. As the expiration date approached, the parties signed an amendment that extended the lease through May 31, 2022.

The conflict arose when the lease term ended. While Gap claimed it moved out on time, the landlord argued that the retailer left the building in such a state of disrepair that it was legally impossible to take the property back. The case centered on a specific "surrender" clause in the contract, which required the tenant to return the building in good operating order and "broom clean." Because the building remained filled with construction debris and unauthorized structural changes, Art City Center filed a lawsuit in the Los Angeles County Superior Court, claiming the retailer had effectively stayed past its welcome.

Cause

The primary cause of this lawsuit was a major disagreement over unauthorized construction and the definition of a "holdover" tenant. Art City Center alleged that Gap transformed the property into a specialized set or workshop without obtaining the required written permission for structural changes. The landlord discovered that Gap had removed essential plumbing fixtures, dismantled electrical systems, and built massive temporary structures inside and outside the building. Art City argued that because these changes made the building unusable for any other tenant, Gap had not actually "surrendered" the property by the deadline.

Injury

Art City Center suffered significant financial losses because it could not lease the space to anyone else following Gap’s departure. The property sat empty and damaged, requiring extensive professional remediation to meet city safety codes. The landlord pointed to physical damages including holes in the floors, missing roll-up doors, and the complete removal of a bathroom. Furthermore, the unauthorized exterior scaffolding and tunnels allegedly caused secondary damage to the building’s facade and roofing, leading to water intrusion and structural concerns that the owner had to address.

Damages Sought

In its complaint, Art City Center sought several forms of financial compensation. It demanded holdover rent, which the lease calculated at 150% of the normal monthly rate for every month Gap stayed in possession past May 2022. The landlord also requested the full cost of repairing the premises. Per the lease agreement, if the tenant failed to make repairs, the landlord could do so and charge the tenant 115% of those costs. Initial estimates for these repairs exceeded $400,000, while the total holdover damages requested at the time of filing surpassed $800,000.

Key Arguments and Proceedings

Legal Representation

Plaintiff(s): Art City Center LLC

·       Counsel for Plaintiff(s): Daniel Y. Zohar | Todd M. Foreman

Defendant(s): The Gap, Inc.

·       Counsel for Defendant(s): Michael A. Geibelson | Daniel L. Allender

Key Arguments or Remarks by Counsel

Claims

The legal team for Art City Center argued that Gap treated the high-end commercial space like a disposable movie set. They presented evidence that Gap had "gutted" parts of the building to accommodate their specific needs without ever asking for permission. Counsel argued that a tenant cannot simply drop the keys and leave if they have rendered the building a shell of its former self. They emphasized that the law and the lease contract protected landlords from tenants who leave behind massive "remodeling" projects that the owner never wanted.

Defense

Gap’s defense team argued that the landlord was trying to get a windfall from a standard commercial move-out. They contended that Gap had indeed vacated the building by the May 31 deadline and that any remaining issues were minor "wear and tear" or items that did not prevent Art City from find a new tenant. They argued that Art City was "estopped" from complaining about the changes because the landlord’s representatives had seen the work in progress and did not object at the time. Furthermore, Gap argued that the holdover rent was an unenforceable "penalty" rather than a fair estimate of lost income.

Jury Verdict

In the Superior Court of California, County of Los Angeles case 22STCV33223 (filed July 2, 2025), the jury found in favor of plaintiff Art City Center LLC on both breach of contract claims against The Gap, Inc. For the first claim, the jury confirmed a valid contract existed, Art City Center performed its obligations, but The Gap failed to surrender the premises by May 31, 2022, in good operating order, causing harm and resulting in an award of $1,294,875.77 in holdover damages. On the second claim, the jury again affirmed the contract and Art City Center's performance, but determined The Gap did not make required lease repairs, leading to harm and an additional $2,250.00 award for repairs. The verdict form was signed by presiding juror on July 22, 2025.

Court documents are available upon request at jurimatic@exlitem.com