DPL terminates Rota Resort lease agreement
For abandonment of premises, non-payment of $639,879 lease and interest fees
Tag: DPL, Rota Resort
The Department of Public Lands has terminated the 1989 lease agreement with the Rota Resort and Country Club for alleged abandonment of the premises and non-payment of $639,879 in lease and interest fees.
Acting DPL secretary Teresita A. Santos sent last Wednesday a notice of termination and notices of violation to Hee Kyun Cho of the Rota Resort LLC, which owns the resort.
Santos stated in the notice that, as provided in Article 27 of the lease agreement, DPL will, upon 15 days of written notice, enter into the premises and take possession of all buildings, fixtures, and improvements, and evict Rota Resort LLC without liability of trespass.
The lease agreement was entered into between the former Marianas Public Lands Corp. (now DPL), and the former SNM Corp. (now Rota Resort LLC) on Oct. 28, 1989.
Santos gave Cho 30 days from the receipt of the notice of termination to remit the full payment of $639,879, which the company owes DPL in lease and interest fees from July 1, 2020, to Feb. 28, 2023.
Santos also gave Cho 30 days from receipt of the notice of termination to require Docomo Pacific (CNMI) LLC to remove its antenna, electronic equipment, and all personal property from the resort premises.
The acting DPL secretary said the lessee did not obtain DPL’s prior written consent to Docomo’s use of the premises, so Docomo’s placement of equipment on the resort premises is a breach of the lease agreement.
Santos said it is their understanding that the lessee entered into a sublease agreement with Docomo to occupy a portion of the resort premises.
She pointed out that Article 15(a) of the lease agreement provides that, except with the prior written consent of DPL, lessee shall not sublease or transfer any part of lessee’s interest in the premises or permit the premises to be used or occupied by others.
Santos said that DPL inspected the Rota Resort property on Nov. 2, 2022, and found that the premises, including the golf course and hotel buildings, were in disrepair, blocked for access with chains and padlocks, and not open for business as of that date.
Santos said that DPL’s follow-up inspection on Feb. 6, 2023, found that the premises had not reopened for business since the previous inspection.
She said DPL did not authorize the closure of the resort.
The acting DPL secretary noted that Rota Resort LLC’s failure to use the premises for the purposes required in Article 2 of the lease agreement for a consecutive period of 90 days without securing the written DPL consent is considered abandonment of the premises.
Santos pointed out that Article 26 of the lease agreement provides that lessee is automatically in default if lessee abandons the premises, with no requirement of written notice or opportunity to cure.
As a result of this default, she said, DPL terminates this lease pursuant to Article 27 of the lease agreement.
The acting DPL secretary said DPL issued a notice of violation to Rota Resort on Dec. 10, 2020, after finding the lessee in violation of several other provisions of its lease, including failure to make timely quarterly lease rental payments on its accounts.
The Dec. 10, 2020, notice of violation found Rota Resort also in violation of Article 10 of the lease agreement for failing to build, construct, and fully equip and furnish a minimum of 200-room hotel.
DPL found Rota Resort in violation of Article 12 of the lease agreement for failing to maintain the buildings and surrounding premises in a neat, sanitary, and attractive condition.
Santos said DPL has determined not to pursue these violations at this time.
She added that due to a lack of development plans with regards to the Swim Hole Park or requests by the Historic Preservation Office to maintain specific historic sites, DPL does not intend to pursue enforcement for lessee’s violations of the lease agreement for failing to complete certain public benefit improvements.
Santos said in response to the Dec. 10, 2020 notice of violation with respect to non-payment of $639,879, Rota Resort, through counsel, argued that its non-payment of lease rental payments to DPL is excused by the occurrence of the pandemic, pursuant to the “force majeure” clause in Article 11 of its lease.
Force majeure refers to an unforeseeable circumstances that hinders a party from fulfilling its part in a contract.
Santos said that provision only applies to the commencement or completion of the original construction, repairs, or reconstruction, and only results in the period of delay to “be added to the period allowed herein for completion of such work” and does not excuse performance entirely.
While DPL understands the hardships the pandemic has caused not only within the CNMI but worldwide as a whole, she said DPL is bound by its fiduciary duty to collect payments on public land leases on behalf of persons of NMI descent.
Santos informed Cho that if he finds it difficult to pay the full amount of $639,879in one lump sum, he must visit DPL office and meet with Evelyn Sablan, who is the director of Financing and Accounting Division, to discuss a workable payment plan. Failure to do so will result in DPL forwarding this matter to their legal counsel for further action.