Legally Speaking: $235M Suns arena deal is a win-win for the team, city
The Phoenix City Council voted to approve a $235 million renovation plan for its downtown arena that currently houses the Phoenix Suns, the Phoenix Mercury, the Arizona Rattlers and various other concerts and events that come to town. You have likely heard all about this, and I would like to give you a different way to think about it.
The renovation or building of a professional sports arena has, and will always have, its fair share of public opinion, scrutiny and fanaticism. Here in Arizona, we have seen it with Glendale and the Coyotes, Maricopa County and the Diamondbacks (times two) and now with Phoenix and the Suns.
The City of Phoenix made a decision decades ago to build a giant building in the heart of downtown. Presumably, it was built to start the revitalization of downtown, to bring in new businesses, to have professional sports teams, and to bring dollars into the community. The city made the decision to keep the building as one of its assets and rent it out to various tenants. Some of those tenants would be long term, like the Suns, and others would be for a day or two — think of a convention or a concert.
Fast forward to present day – Phoenix still owns the 27-year-old building and rents it to tenants. Unfortunately, this asset needs updating and that responsibility typically falls to the owner. Maybe not all the responsibility, but how often do you hear of a tenant paying to replace a roof, the electrical wires or the plumbing? If you were renting an apartment or a house, would you be willing to absorb these costs or would you be on the phone demanding the landlord/owner to do it?
Legally, the parties to a contract are held to the terms of the contract until it expires or the parties agree to change it. Under this contract, both Phoenix and the Suns have responsibilities. Phoenix has the responsibility to keep the building habitable and the Suns have the responsibility to pay rent. If either fails to keep their end of the bargain, the other can claim “breach” and try to get out of the contract.
In the legal real estate world, if a tenant starts taking on the responsibility that belongs to the landlord, the tenant usually gets to reduce its rent, becomes part owner, and/or, in a commercial property, shares in the profits. This is exactly what is going on with Phoenix and the Suns.
At the end of the day, #LegallySpeaking, this is a win-win for the parties. It is a win-win because there are no lawsuits and the courts are not involved. Monies can go to the venture instead of to litigation.
Presumably, since each has skin in the game, each will work hard to continue to make this venture successful. That being said, as a sports fan, I am hoping the Suns can use this momentum to make their future seasons just as successful.
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