Mill Valley preschool files $2.5M claim against district

A preschool facing eviction in Mill Valley has served the Mill Valley School District with a legal claim to recover nearly $2.48 million in expenses.

The claim by Terra Marin School includes $2.3 million it says it invested for repairs and another $175,360 paid to the district in back rent from a prior tenant.

The so-called “government claim,” distributed by hand to district officials at a board meeting Sept. 11, is “a step toward a lawsuit,” said Terry Tao, attorney for Terra Marin founder and operator Wendy Xa.

The claim alleges “breach of contract, breach of the covenant of good faith and fair dealing, misrepresentation, interference with contract, business interference, tortious interference with contract and unfair business practices.”

The district owns the building at 70 Lomita Drive where the preschool is located. The district has been leasing it to Terra Marin since 2018.

The district wants to use the property for administrative offices while it builds a new middle school. The district says it has the right to terminate the lease under the state education code because the property is needed for education purposes.

Neither Mill Valley board of trustees president Sharon Nakatani nor district superintendent Elizabeth Kaufman responded to repeated requests for comment this week.

Tao said the claim is separate from the eviction process that the school district initiated last month in Marin County Superior Court. No court date has been set, he said.

Xa continues to offer classes at the school in the meantime, he said.

“I can’t believe the wreckage the Mill Valley School District created at the pinnacle moment when Terra Marin was flourishing and expanding,” Xa said in an email.

“The Mill Valley School District deliberately crushed the Terra Marin School, took the future of our preschoolers, eliminated our French preschool and our Spanish preschool, deliberately interfered with Terra Marin enrollment by serving eviction papers on parents and volunteers, and obliterated over $2.3 million Terra Marin School had literally just invested in the school effectively taking my life savings,” she added.

The claim is the latest chapter in a dispute over Terra Marin’s lease with the school district. The lease had 16 years left on it in 2018, when Xa said she paid the district $175,360 to cover 18 months of back rent owed by the prior tenant, Ring Mountain Day School, and assume the balance of the lease. She says she invested $2.3 million in savings to repair plumbing, electrical and other systems at the school.

Xa exercised two of four five-year rollover options to continue the lease in 2019 and again in 2023. In her 2023 option exercise late last year, she notified the district that she would be adding a sublease for a French preschool program to the Spanish and Mandarin immersion programs at the school.

Several weeks later, the district rejected the sublease request, according to Tao. That began a back-and-forth dispute over what would come next. Between November and April, when the district issued a two-year lease termination notice, the district did three things, according to Tao.

“They raised the rent by 80%, they pushed Terra Marin into a corner of the building and they provided a lease amendment that required Terra Marin to pay for significant improvements to the space that the district was going to occupy,” Tao said.

According to Tao, the district also wanted an amendment to the termination notice that would allow it to give Terra Marin 120 days to vacate the space, instead of two years. Terra Marin rejected the amendment, Tao said.

During this time, Xa lost the expected partnership with the French preschool, along with the revenue that would have come from the sublease. The Spanish program also was eliminated.

Xa and the district disagree on what occurred after that. Xa asserts in the claim that the district raised her rent from $1.81 per square foot to $3.30 per square foot and reduced her space from 11,013 square feet to 7,207 square feet.

The district, on its part, claimed Xa defaulted on rent payments in June and July. It issued an immediate lease termination notice. When Xa did not leave the premises and continued to run the school, the district issued an eviction notice and filed the eviction paperwork in Marin County Superior Court.

Tao calls the lease termination “illegal,” saying the district does not have the right under state code to terminate the lease unless the building were to be used for a school — not for administrative offices.

“The illegal termination by the district undermines both the business purpose of the Terra Marin lease, the payment of $175,360 in back rent for the 16-year term, and the investment of $2.3 million in improvements provided by Terra Marin for the premises,” the claim states.