MACGREGOR MILLS LLC v. WAVESEER OF MASSACHUSETTS LLC (2026)

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

This appeal stems from a summary process action in which the plaintiff, Macgregor Mills, LLC (landlord), sought to evict the defendant, Waveseer of Massachusetts, LLC (tenant), due to unpaid rent. As we discuss in more detail below, the parties executed a commercial lease for space which the tenant intended to use to cultivate marijuana. However, the tenant did not obtain the proper licenses to proceed with the operation of a cannabis business and attempted to terminate the lease on that basis. Ultimately, a judgment for possession entered in favor of the landlord, and following an evidentiary hearing on damages, a judge of the Superior Court awarded the landlord full payment of all rent due under the lease as well as attorney's fees. The tenant appeals, and we affirm.

Background. The tenant is a limited liability company engaged in the cultivation of cannabis and the manufacture, processing, distribution, and sale of cannabis-related products. The landlord is also a limited liability company primarily involved in the business of leasing space in its commercial property located at 75 Green Street in Clinton (building). The building consists of a basement and four upper floors.

On June 26, 2020, the parties entered into an initial lease agreement in which the tenant would occupy approximately 48,960 square feet of the building, consisting of the fourth floor, as well as a subbasement and dock area. On November 18, 2020, the parties executed an amended and restated lease agreement (lease), which provided the tenant additional space on the third floor as well as the original space. Of relevance here, the “Permitted Use” of the total rented area (premises) included the “Cultivation of cannabis and manufacture, processing[,] distribution and sale of cannabis-related products ․”

The lease contained a provision, article 14.3(b), outlining the tenant's termination rights if the tenant failed to obtain the licensing needed to run its cannabis business. Article 14.3(b) of the lease provided in relevant part the following:

“In the event Tenant's cannabis cultivation and/or product manufacturing and retail licenses necessary for the Permitted Use at the Premises are not issued ․ Tenant shall have the right to terminate this Lease upon ninety (90) days written notice to Landlord. This right of termination shall not arise where Tenant intentionally fails to obtain ․ such licenses ․ or otherwise engages in conduct for the purpose of causing the non-issuance ․ of such licenses.”1

Although the tenant never took possession of the premises, the tenant paid rent in accordance with the lease through October 2021. The tenant made no complaints about the space as of that time.

On February 3, 2022, the landlord received a letter from the tenant, sent via e-mail message and certified mail, in which the tenant stated that it was “exercising its right, pursuant to Article 14.3(b) of the Lease, to terminate the Lease because [the tenant] has not, and cannot, obtain the licenses necessary for the Permitted Use at the Premises.”

The landlord considered the letter to be an ineffectual attempt to terminate the lease. The landlord construed article 14.3(b) as requiring the tenant to show an attempt to obtain the proper license and a denial of the license application.

On March 10, 2022, the landlord's counsel sent a letter to the tenant, asserting that the tenant's termination letter was ineffective because the tenant “failed to offer a legitimate reason under the Lease to terminate” and that the tenant remained in default of its payment obligations under the lease. The letter noted that, “[w]ith the Landlord's assistance, at the Landlord's own cost and expense, [the tenant] obtained the necessary local approvals” for licensure but that, according to the landlord's research, the tenant “ha[d] still not filed for or otherwise attempted to obtain the necessary state licenses” and that “[f]ailure to apply for or seek a license is an intentional action within the control of [the tenant] and not the type of reason clearly intended under [article] 14.3(b) whereby [the tenant] could terminate the Lease.”

Shortly thereafter, on April 13, 2022, the landlord issued its own notice of termination under article 14.1(a) of the lease. Again, the tenant made no specific complaints about the premises to the landlord at this time.

On June 30, 2022, the landlord initiated the present summary process action, seeking judgment for possession, an order of eviction, and a monetary award for unpaid rent from November 2021 through June 2022, totaling $265,933.31, excluding interest and costs.² The tenant did not contest possession and did not file an answer to the complaint. Judgment for possession entered in favor of the landlord on August 4, 2022.

Following entry of judgment for possession, the landlord moved for an assessment of damages. At the evidentiary hearing on damages in November 2023, only counsel for the tenant was present; the tenant itself did not appear and called no witnesses. The landlord offered both testimony from its director of operations and several exhibits. At the conclusion of the hearing, after the tenant's counsel argued that the initial termination letter from the tenant was effective, the judge directed the parties to submit briefs addressing the termination provision of the lease. In its brief, the tenant, with no supporting documentation, argued for the first time that the building “was unsuitable for a cannabis facility[ ] because of its inadequate electrical system.” The parties returned to court for additional argument on December 13, 2023. On January 2, 2024, the judge issued a decision in favor of the landlord, awarding the landlord damages in the amount of $1,005,217.96.

Discussion. 1. Standard of review. The resolution of this case turns on the interpretation of certain provisions of the lease. “The interpretation of a written contract or lease is a question of law ․,“ which we review de novo. Lexington Ins. Co. v. All Regions Chem. Labs, Inc., 419 Mass. 712, 713 (1995). See Cambridge St. Realty, LLC v. Stewart, 481 Mass. 121, 130 (2018) (“lease is a contract” and “its proper interpretation is a question of law for the court” [citations and quotation omitted]). See also Sourcing Unlimited, Inc. v. Cummings Props., LLC, 102 Mass. App. Ct. 653, 658 (2023). “Where there is no ambiguity, we construe the words of a contract in their usual and ordinary sense” (quotation and citation omitted). DeWolfe v. Hingham Ctr., Ltd., 464 Mass. 795, 803 (2013).

2. Interpretation of termination provision. “A lease for a term of years may properly be made subject to termination at a specified time, upon the occurrence of an event or events within the control of the party electing to terminate.” Loitherstein v. International Business Machs. Corp., 11 Mass. App. Ct. 91, 93 (1980). In the event that the tenant's proper cannabis licensing necessary for the permitted use of the premises did not issue, article 14.3(b) of the lease granted the tenant the right to terminate the lease by providing ninety days’ written notice to the landlord. This provision created a conditional limitation, “which was unilateral in nature, exclusively for [the tenant's] benefit, and thus to be strictly construed.” Loitherstein, 11 Mass. App. Ct. at 94. Contrast Sourcing Unlimited, Inc., 102 Mass. App. Ct. at 662 (strict compliance less compelling where option not to extend lease was mutual). In order to exercise its unilateral right to terminate the lease, the tenant must strictly adhere to the conditions in the provision. See id. at 659, quoting Westinghouse Broadcasting Co. v. New England Patriots Football Club, Inc., 10 Mass. App. Ct. 70, 73 (1980).

Accordingly, it was the tenant's burden to show that it could not obtain the proper licensing through no cause of its own. See Patriot Power, LLC v. New Rounder, LLC, 91 Mass. App. Ct. 175, 180 (2017) (tenant's burden to show proof of satisfaction of condition to terminate ongoing lease obligation). See also Eliot Discount Corp. v. Dame, 19 Mass. App. Ct. 280, 285 (1985) (burden of proof usually borne by party “seeking to alter the status quo to another party's disadvantage”). The tenant had ample opportunity from the time the landlord filed its summary process complaint in June 2022 to the evidentiary hearing on damages in November 2023 to demonstrate that it pursued the necessary licensing or to show the nature of any obstacle that would have thwarted its application. Instead, the record only contains the tenant's letter purporting to exercise the termination option. See Loitherstein, 11 Mass. App. Ct. at 96 (“A party who stumbles in exercising an option [to terminate] is generally not entitled to equitable relief”). The tenant's letter, which sparsely stated that it “has not, and cannot, obtain the licenses necessary,” does not satisfy the occurrence of the condition, namely that it did not and could not obtain the licensing through no cause of its own.

The tenant contends that it matters not whether the absence of proper licenses was due to its failure to obtain them. According to the tenant, the simple fact that the licenses were not issued -- for any reason -- was sufficient to trigger the termination provision.³ This interpretation would render the provision's second sentence, which requires that the tenant not “intentionally fail[ ] to obtain” the license, meaningless. We note that the “particular language for the [termination provision] was carefully chosen by sophisticated parties.” Loitherstein, 11 Mass. App. Ct. at 94. As such, the lease “should be construed in such a way that no word or phrase is made meaningless by interpreting another word or phrase, because the interpretation should favor a valid and enforceable contract or lease rather than one of no force and effect.” Lexington Ins. Co., 419 Mass. at 713. Because these sentences in the provision must be read together and given a reasonable construction, the tenant had to show that the licensing did not issue for a reason other than its intentional conduct. See Markey v. Smith, 301 Mass. 64, 70 (1938). Having made no effort to apply for the licensing is an intentional failure to obtain it. This does not necessarily mean, as the tenant contends, that the lease requires “a party must literally apply for a license it knows it cannot obtain,” but there must be some explanation as to the alleged futility of the application. See Gutierrez v. Board of Managers of Flagship Wharf Condominium, 100 Mass. App. Ct. 678, 682 (2022) (burden borne by party arguing irregularity).

3. Electrical issue. To the extent that the tenant now argues that it should have been excused from its duty to apply for the proper licensing because the building's inadequate electrical system would have doomed its application and, thus, its application would have been futile, the record contains no evidence whatsoever of the state of the building's electrical system.⁴ Notably, the tenant made no mention of electrical issues in his February 3, 2022 termination letter, filed no responsive pleadings in this case, and chose not to call witnesses, conduct cross-examination of the landlord's witness, or submit any exhibits at the evidentiary hearing. Had the tenant done any of that, it might have raised a compelling affirmative defense. See Federal Home Loan Mtge. Corp. v. Bartleman, 94 Mass. App. Ct. 800, 809 (2019) (affirmative defenses in summary process may be raised in later filing so long as issue is timely and fairly raised). See also Commonwealth v. Farley, 64 Mass. App. Ct. 854, 861-862 (2005) (“Where a defendant asserts an affirmative defense, he takes on the burden of production”). Despite the lack of any support for the electrical system's inadequacy, however, the judge considered the allegation from the tenant's posthearing memorandum and concluded that, nonetheless, the tenant's decision not to apply for the licensing was an intentional failure to obtain it. Based on the undisputed evidence, the judge did not err nor abuse his discretion in reaching his conclusion.

Judgment affirmed.

FOOTNOTES

1.   The parties agree this is the operative language. The elided text addressed expired or terminated licenses and the failure to renew licenses.

2.   As recounted in the tenant's brief, the tenant first filed a complaint against the landlord in Suffolk Superior Court on June 6, 2022; the tenant's complaint alleged breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, recission, violation of G. L. c. 93A, § 11, and a claim for declaratory relief that the tenant is entitled to terminate the lease. These claims centered on the general allegation that the building's electric service size was inadequate for any cultivation activities in the building, and that the landlord knew this or should have known this, but still explicitly marketed the building as suitable for marijuana cultivation. While the cases were not consolidated, they were heard together in Worcester Superior Court before the same judge. Cf. Schaer v. Brandeis Univ., 432 Mass. 474, 477 (2000) (considering “matters of public record, orders, [and] items appearing in the record of the case”).

3.   Notably, the tenant's counsel conceded at oral argument that the tenant's duty to file an application for the licensing would be implied by the covenant of good faith and fair dealing. See Weiler v. PortfolioScope, Inc., 469 Mass. 75, 82 (2014) (“covenant of good faith and fair dealing ․ provides ‘that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract’ ” [citations omitted]).

4.   The tenant's arguments regarding the inability of the electrical system to comply with the applicable regulatory rules, raised for the first time in its brief, are waived. See Simmons v. Chace, 105 Mass. App. Ct. 550, 556 (2025) (“Objections, issues, or claims -- however meritorious -- that have not been raised at the trial level are deemed generally to have been waived on appeal” [citation omitted]).