The Festival of Arts is seeking a court order to evict Terra Laguna Beach, claiming the restaurant operator failed to pay more than $16,000 in rent and obtain required city permits to install an elevator that would have provided wheelchair access.
On Oct. 22, attorneys for the Festival of Arts served Terra Laguna Beach, Inc., an entity controlled by Laguna Beach Co. CEO Mohammad Honarkar, with a 10-day notice to perform. The Festival, which leases the publicly-owned grounds from Laguna Beach, worked with Honarkar since at least February 2020 to complete agreed-upon improvements needed for compliance with the Americans with Disabilities Act, according to the complaint filed in Orange County Superior Court.
“Sublandlord provided multiple concessions to assist you in completing the improvements, including waiving a year of percentage rent, yet the agreed-upon improvements remain unfinished almost two years after the deadline in the Sublease,” Festival attorney Richard Sontag wrote in a letter.
A festival spokesperson referred a reporter to the organization’s attorney, who declined to comment on Monday.
The pandemic forced the Festival to cancel its 2020 season, which effectively shuttered Terra until last July.
Among the other gripes was that Honarkar’s company controlling Terra entered a court-ordered receivership by the judge overseeing his divorce. This receivership lasted for more than 30 days, violating the lease agreement with the Festival.
In September, Honarkar’s companies exited their latest receivership after reaching a deal with his current creditor.
The Festival also complained that Honarkar failed to provide quarterly financial statements of gross sales for more than a year. The statements would have allowed the Festival to accurately calculate the monthly rate of 12% of gross receipts. These rent payments must annually generate at least $200,000 for the Festival, according to court documents.
Additionally, Terra failed to correct a liquor license that encumbered the entire festival grounds, preventing the Festival from obtaining its own liquor licenses.
Honarkar said the Festival’s claims are meritless and the complaint is retaliation for a lawsuit he filed in October. His company has invested about $6 million into improving the property since 2019.
“This is the best venue to be an outdoor restaurant,” Honarkar said. “They’re basically preventing me from using the space. They’re not good people.”
According to the initial Oct. 29 complaint filed by Terra Laguna Beach, Honarkar relied upon claims by the Festival that the tennis courts off Laguna Canyon Road would be removed to create more parking. That never happened.
Despite the hard closure of the festival ground due to COVID-19, Terra made plans to eventually reopen in 2020 that included hiring Michelin star winning chef Craig Strong. But the Festival refused to allow the reopening, causing Honarkar’s company to suffer millions of dollars in losses.
“FOA represented to Plaintiff that it was the City that did not approve of the restaurant reopening; however, Plaintiff is informed and believes that this decision was made solely by FOA,” Terra’s attorney Isaac Zfaty wrote in the complaint.
In April, the Festival started rejecting Terra’s monthly rent payments. The uncashed checks were returned with correspondence about alleged lease violations, according to the company’s complaint.
In a statement issued Tuesday, Honarkar said Terra offered to pay all the rent owed from the year-long closure but the Festival refused to accept it, alleging violations of the lease that don’t exist. Terra has also submitted plans to install an elevator to provide required wheelchair access.
“We expect those plans to go before the Planning Commission shortly,” Honarkar wrote. “In the meantime, we have installed a temporary lift that provides wheelchair access to the entire restaurant, as the law requires. Other allegations made by the Festival of Arts are similarly unfounded.”
Terra Laguna Beach is asking Orange County Superior Court judge Lon Hurwtiz to find that it hasn’t breached the lease and is entitled to continue operating on the festival’s property. A case management conference is scheduled for May 2, according to court records.View Our User Comment Policy