X Corp is now suing a sublessee for unpaid rent
Irony alert: Complaint cites defendant as claiming X 'did not even pay rent for such period'
Elon Musk's X Corp is suing a former subtenant for breach of contract, saying it owes X nearly three-quarters of a million dollars in unpaid rent and early lease termination fees – ironic as Twitter itself is being sued for not allegedly paying rent on the same building.
X says in its complaint [PDF] that Atlas Exploration, a company marketing an invite-only credit card with dining and travel perks (and formerly known as Point Up), sublets the entire 30th floor of 650 California Street (where The Register also has an office) from X with a contract lasting until 2025.
Last year, Atlas negotiated an early termination of that lease with X which required it to pay a $1.1 million early termination fee and several months of rent, but X Corp alleges it hasn't forked over a dime.
"Atlas failed to timely make any of the payments to X Corp that it agreed to under the Termination Agreement, and has since refused to make any of those payments, despite X Corps' demands," the complaint asserts.
The lawsuit (and the termination agreement included as an exhibit) indicate that Atlas would pay the termination fee in three installments, as well as the back rent for months the space was unoccupied – in this case September, October and November of 2022, totaling $340,263.09. X says it has fully drawn Atlas' letter of credit, leaving a remaining balance of $713,569.09 that X says it's owed.
X says in the complaint that it contacted Atlas in April 2023, demanding the $714k it was owed, and Atlas responded with a letter (both included as exhibits to the complaint linked above) that alleged X Corp had operated in bad faith and "misled" Atlas during the lease termination negotiations.
"Twitter assured Atlas repeatedly that it should expect to move out in August. Accordingly, Atlas relied on Twitter's assurances and vacated the premises in August, 2022," Atlas attorney Kevin Hill says in his email back to X's lawyers.
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Hill claims in the email: "Due to Twitter's delays, however, the Agreement was not executed until October. Twitter is now demanding that Atlas pay rent in full for September and October, 2022, even though Twitter had possession of the premises in August 2022."
X's response is that Atlas still owes the money because the new sublessee hadn't moved in yet, meaning X's delay in getting the early termination agreement completed may be a key factor in deciding the case.
Likewise, X also says that Atlas made no mention of the early termination fee in its response to X, which Musk and co concluded means it didn't dispute that it owed the unpaid termination fee. The termination agreement itself, however, mentions that the fee is based on an early termination date of August 1, while the agreement itself has October 5 penciled into the contract as the date the agreement was entered into.
We need not remind El Reg readers of the multitude of lawsuits that Twitter, now X, is facing that allege unpaid rent since Elon Musk took over.
Early this year, multiple landlords accused Twitter/X of not paying the rent, including on its Market Square HQ, property owned by the British crown, and even unpaid rent at 650 California Street - the building in question in this suit.
While X argues in the suit that it "has suffered monetary and other damages" in an amount at least that of the three-quarters of a million bucks it's trying to extract, Atlas quite apparently disagreed.
In a letter, marked as exhibit 4 in the complaint [PDF], Atlas claims: "We understand that Twitter did not pay rent to the landlord for the months of September and October, 2022, and consequently has not suffered any actual damages.
It went on to allege: "The payment of rent to Twitter for [those] months … would constitute an unjust windfall because Twitter did not even pay rent for such period."
We contacted lawyers for both X and Atlas to ask questions about the case, and get some clarification, but haven't heard back from either. ®