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Getty Realty Asks Court to Compel Rent Payments

Argues Getty Petroleum must continue to pay until environmental cleanup dispute settled

JERICHO, N.Y. — Getty Realty Corp., the owner of 800 gas-station properties that Getty Petroleum Marketing Inc. rents and subleases to operators, has asked the bankruptcy court to compel the company to continue paying rent on the properties while an environmental cleanup dispute is resolved, reported Dow Jones.

The landlord is disputing what it calls Getty Petroleum’s “hotly contested alleged right” to offset rent payments because of environmental remediation costs. It also argued that because Getty Petroleum is continuing to occupy the properties and collect rent from operators subletting the properties, Getty Petroleum should not be able to avoid rent payments.

Getty Petroleum has said that “significant contamination of soil and/or groundwater” is present at many of the gas stations and it can’t get funding to improve the properties because of the environmental damage.

In court papers, Getty Petroleum estimated that the cost of the cleanup could exceed $75 million. It halted rent payments to Getty Realty in October and November 2011 and plans to withhold rent through July 2012 to offset the costs of the alleged cleanup costs.

Getty Realty, however, argues that even if the environmental cleanup costs are a valid reason to withhold rent, which it “vigorously disputes,” Getty Petroleum must make rent payments while the dispute is being resolved.

Getty Realty is only asking Judge Shelley Chapman of the U.S. Bankruptcy Court in Manhattan to compel Getty Petroleum to pay for now, not to rule on whether Getty Petroleum’s actions are allowed.

If, in fact, the landlords are responsible for environmental cleanup costs, “the debtors will remain fully able to assert that right against rent in future months when–and if–the debtors are actually required to spend money for actual remediation,” Getty Realty said.

A hearing on the matter is scheduled for January 5, said the report.

Getty Petroleum, a former unit of Russian oil company OAO Lukoil, filed for Chapter 11 bankruptcy protection on December 5 in the midst of the lease dispute and as it faced a $230 million arbitration award to Bionol Clearfield LLC stemming from a bid to end an ethanol-supply deal, the news agency added.

Getty Realty separated from Getty Petroleum in 1997 but signed a long-term lease deal on the properties. Getty Realty is now seeking to end the deal.

Jericho, N.Y.-based Getty Realty Corp. is the largest publicly traded real-estate investment trust (REIT) in the United States specializing in ownership, leasing and financing of retail motor fuel and convenience store properties and petroleum distribution terminals. The company owns and leases approximately 1,155 properties nationwide.