Attorney wants KPS to honor its lease
June 11, 2008 · Updated 10:53 AM
"An attorney for the owners of the Silverdale building that KPS Health Plans used to occupy has contacted the Washington State Insurance Commissioners office, demanding the financially ill company complete its lease agreement.KPS signed a five-year lease for the bulding in August 1996, according to Ed Wolfe, the attorney for the owners of the Vanguard Building on Silverdale Way. Those owners, Emil and Anna Reynolds, received a letter dated Dec. 14, 1999, informing them the company would be terminating its lease at the end of January 2000.Officials with the state Office of the Insurance Commissioner, which now operates financially ailing KPS, declined to comment on the matter.With 18 months remaining in the contract, Wolf said the terminated contract affects the Reynolds family in several ways.Monetarily, for instance: although Wolf would not discuss how much money was involved in the remainder of the lease, he told the Central Kitsap Reporter in January that 19 months of the lease totaled about $150,000 in lost lease payments.A contract is a contract, Wolf said. It's either legally binding or it's not.The couple had planned to use money from KPS' monthly payments in the future, Wolf said.They were counting on this for retirement, he said.While two other companies were operating out of the Vanguard Building, Wolf called KPS the anchor tenant of the facility, providing a majority of the income for the Reynold family. Wolf also said the termination of the lease could void a potential sale of the building for more than $1 million.With the diminishing chance of the building's sale, Wolf said the couple is making attempts to find other businesses to occupy the Vanguard.Wolf said the Reynold family, having been supportive of KPS in the past, are troubled the organization would violate their lease.Each was the customer of the other, he said. But KPS is obligated to pay for the rent for the full term of the lease.After financial woes resulting in eventually becoming more than $9 million in debt, KPS was placed into receivership by court order in August 1999, with the Insurance Commissioner being appointed the receiver. Under attempts to revive the company, both employees and subscribers have been released, assets sold and money-losing state contracts withdrawn.Emphasizing that no legal claim has been filed, Wolf said he sent a letter dated March 8 to the Insurance Commissioner requesting KPS' compliance with the lease. He said all he can really do now is wait for a response, which he expects by the end of the month.We're waiting for face-to-face negotiation, he said.As a worst-case scenario, Wolf said the KPS lease termination could lead to the couple being unable to afford the mortgage payments.As time goes on, my clients are setting themselves up for foreclosure, he said."