What happened?
This morning Myer Holdings Ltd (ASX: MYR) released a statement to the ASX that the landlords of their Chadstone store in Victoria had served them with a writ (part of the court order process) alleging that Myer owes them around $20 million because of a dispute over outgoings Myer was liable to pay over the last 15 years.
What does it mean?
When a company takes out a commercial lease, the tenant has to pay an amount of rent as well as certain outgoings associated with the property, such as insurance, council rates, and water rates, among others.
Here's the full wording:
"The landlords allege that there was a mutual mistake in the drafting of the variable outgoings provisions in the lease for the Myer Chadstone store or that those provisions have been misinterpreted.
The landlords seek, among other things, rectification of the lease and payment of alleged unpaid outgoings in respect of the period FY00/01 to FY15/16 in the aggregate amount of $19.14 million plus GST, as well as interest and costs.
Myer believes the claim has no proper basis, denies any liability under it and will vigorously defend it."
Where to from here?
Obviously Myer will defend the allegations, however the potential lawsuit increases the risk in investing in Myer because a $20 million hit to profit could wipe out up to 30% of profit (Myer generated a net profit of $69 million in 2015/16 financial year).
I prefer to invest in companies that don't have lawsuits hanging over their head so will be taking a closer look over the break at some of my favourite big dividend stocks for 2017.
