Cliff Buchan
News Editor

A Forest Lake man who asserted Fairview defaulted terms of its lease agreement for the District Memorial Hospital property has no friends in the legal firm representing Fairview.

An attorney for Fairview Health Services said last month it was his opinion that Fairview has not defaulted terms of its 1995 lease by entering purchase agreements to sell the hospital building and grounds in 2006 after it takes possession of the property.

In a letter dated Oct. 19, attorney Mark E. Hamel concluded Fairview was not under default.

The question of default was raised this fall by city resident Richard Pecar who is seeking a delay in a 48-unit affordable housing project planned by Duffy Development of Minnetonka on the former hospital campus. Duffy has a purchase agreement to buy land for $600,000 from Fairview.

Pecar has challenged the lease and asked the Memorial Hospital District governing board for a special meeting to reconsider the lease. To date, there has been no interest from the hospital board in calling a special meeting.

Under the 10-year-old lease, Fairview agreed to ìnot sell, lease, sublease, pledge, assign, mortgage, encumber, give or otherwise transfer or convey any interest in its leasehold or other rights,î according to the lease.

By doing so with purchase agreements with Duffy and a group that will lease space to Lakes International Language Academy, Fairview is in default, Pecar says.

Attorney disagrees

Not according to Hamelís review, however.

In the Oct. 19 letter to George Chresand, senior vice president and general counsel for Fairview Health Services, Hamel wrote that in the purchase agreements, Fairview has agreed to sell its fee title to the property, not its interest in the leasehold created by the lease or any other rights that Fairview may have under the lease.

Referring to Section 1.24(c) of the lease, Hamel wrote: ìUpon receipt of the purchase price, the district shall execute a quit-claim deed and bill of sale, conveying title to the hospital facility and moveable equipment to Fairview and all obligations under the agreement shall terminate.î

When Fairview acquires the property from the district, Fairviewís leasehold interest and all of Fairviewís other rights under the lease shall cease to exist, and Fairview will not have any leasehold interest or other rights under the lease to sell to third parties, he wrote.

Hamel said Fairviewís sale of the property to third parties has nothing to do with the lease, except that Fairview happens to be acquiring the property by exercising its option to purchase the property contained in the lease. Fairview is selling its fee title to the property to the third parties; Fairview is not assigning its option to purchase contained in the lease, he added.

Hamel concluded that Fairview has complied and will continue to comply with the lease in all respects until lease terminates upon Fairviewís acquisition of fee title from the hospital district.

Fairview has notified the hospital board of its intent to exercise the lease option to acquire the property for the nominal fee of $1 on Jan. 1, 2006.

Pecar said this week the Minnesota Attorney Generalís office has declined his request to review the case, saying it has limited authority in such matter. The matter could yet get a review by the Minnesota State Auditor who has the authority to review financial transactions of local governmental units such as the hospital district.

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Forest Lake Times
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