The Minnesota Tax Court rarely sits en banc, which is when all three judges of the Tax Court decide a matter instead of just one. When they do, it’s to address an issue that is particularly complex or important.

The commercial landlord of a downtown Minneapolis office tower, 250 Nicollet Office LLC, filed a property tax appeal. To help value the property, the Hennepin County assessor asked for all the tenant leases. A landlord’s most confidential information are its leases. If competitors know when tenants need to renew their leases and the current terms, they will try to poach those tenants with better terms. In this case, 250 Nicollet Office LLC was willing to provide the leases to the assessor, but it was understandably hesitant to do so without confidentiality. The County refused. To address whether the landlord could produce the leases under a protective order, the judges sat en banc.

The Commercial Landlord’s Conundrum—Pursue Tax Relief, but Risk Exposing Confidential Leases to Competitors

Commercial landlords in Minnesota face a predicament when bringing a property tax appeal. They want tax relief, but to get it, they potentially expose their leases to their competitors. The source of this risk is a statute unique to Minnesota.

The statute requires all income-producing property owners to provide assessors with certain information from their rent rolls. This includes tenant names, base rent, start/end dates and square footage. Failure to produce this information by August 1 results in an automatic dismissal of the case. When the owner provides this information, it is protected under the Minnesota Government Data Practice Act as nonpublic assessor’s data. Although this information is protected from the public, the assessor’s office can use it as part of their official functions, including in appraisal reports for similar properties. That means the assessor could use an owner’s rent roll information as a comparison in an appraisal report to value a competitor’s property, thus exposing the information. But what about when the assessor requests the actual leases?

Minnesota statute further provides that assessors can request the actual leases if they believe it is necessary to properly evaluate the property. The landlord then has 60 days to produce them. Unlike the rent roll information where failure to produce the information results in an automatic dismissal, the Minnesota Rules of Civil Procedure address any failure to produce the leases. In other words, the remedy for failure to produce the leases is left to the court’s discretion, creating several questions.

Must Leases Be Produced?

The first issue was whether a commercial landlord has to provide the leases when requested. If failure to provide the leases didn’t result in an automatic dismissal like the rent roll information, was it really mandatory? Here, the Tax Court had conflicting rulings. One opinion held that it was mandatory, while another reasoned it wasn’t. Resolving this discrepancy was one of the reasons the court sat en banc. The Tax Court ruled that the plain language of the statute stated that the landlord “must” provide them, thereby making it mandatory. The Tax Court therefore overruled the previous contrary decision on this point.

Are Leases Protected?

The second issue was whether the leases were subject to the Minnesota Government Data Practices Act as nonpublic assessor’s data like the rent roll information, or if the court could issue its own protective order. If the leases were subject to the Data Practices Act, then the Tax Court had already ruled that it could not issue a protective order because the statute already provided the relevant protection. But the section of the statute governing the leases made enforcement subject to the Rules of Civil Procedure. The Tax Court reasoned that this allowed the court to issue its own protective order.

What is the Protective Order’s Scope?

The third issue was the scope of the protective order over the leases. The County argued that because leases were part of the same statute requiring landlords to provide certain rent roll information that was protected by the Data Practices Act, the court’s order should provide the same protection and allow assessors to use the leases as part of their normal office functions.  250 Nicollet Office LLC argued that its leases should be limited to this case only. The Tax Court ruled that the leases should receive this-case-only protection, assuring landlords that their leases will not fall into the hands of competitors.

Steps Landlords Can Take to Keep Leases Confidential

Going forward, if assessors request leases from commercial landlords, landlords should seek an appropriate protective order that limits the use of those leases to the particular case. The times that a commercial landlord has to worry about their leases being exposed to competitors should be as rare as the Tax Court sitting en banc.