I thought we’d take a break away from the vigorous debate about whether lease renewal (and other) options should be conditioned on the absence of a default, and return to the more mundane discussion about exclusive use right issues.
A number of contributors thought that our industry should have a different name instead of “Rogue Tenant” for a tenant who violates the prohibition, in its own lease, against conducting a use that was granted to another tenant as that other tenant’s exclusive use at the project. You can see those comments at our August 11 Ruminations entry.
What do you call a tenant that is violating another’s exclusive use right, but that isn’t a “rogue tenant”? Absent any knowledge on its part that the other tenant has bargained for an exclusive use right, you probably can say: an “Innocent Violator.”
How does this come about? Well, the landlord should have placed a properly worded restriction in the Innocent Violator’s lease, but didn’t. And, the tenant who thinks it is protected should have recorded a memorandum of lease or a short form of lease or should have negotiated for the recordation of a Declaration or some other form of recorded document that would give constructive notice to later arriving tenants. I’m not sure of the efficacy of merely recording a memorandum of lease or a short form of lease. I think the “effect” of such a document varies from jurisdiction to jurisdiction. I leave that for research on a case by case basis. If people want to chime in as to how their home state treats this, please, please do so.
Another kind of Innocent Violator might be one who was already at the property. So, you say – of course, but why would the exclusive use right have been applicable to an existing tenant? Answer – the landlord “over promised.” It didn’t carve out pre-existing tenants – the lease granting the exclusive use right just said: “Landlord shall not permit any other tenant at the project to sell widgets on Thursdays.” “Any other tenant” means: “any other tenant.” Now, I’ve seen a case that said the “protected tenant” should have had no expectation that “any other tenant” would encompass pre-existing tenants, but that kind of case, to me, was wrongly decided. A landlord can take such a risk if it wishes to do so in order to persuade a new tenant to lease space. If a landlord want to take the chance that no existing tenant with a broad use clause will change its use and thereby trample on a newer tenant’s exclusive use right, I don’t see why it shouldn’t have the freedom to do so.
How about this kind of Innocent Violator, the kind that is down the block at another property close enough to fall within the “and no premises owned by the same landlord or by any affiliate of landlord, if located within three miles of the demised premises, may be used for the sale of widgets.” So, a partner of the landlord is also a partner in a nearby shopping center, and the restriction never go into the other shopping center’s leases. Further, the recorded memorandum of lease would never be found while searching the remote shopping center’s title. And the landlord granting the exclusive use right doesn’t have the right to record a declaration or easement.
You can probably find other examples of an Innocent Violator.
Now, what remedies should a “protected” tenant have against its landlord or the other tenant if a Innocent Violator violates the protected tenant’s exclusive use right. Answer: wait for another time, I’ve gone on overtime already in this Blog posting.
Does anyone know of any other kind of violator other than a “Rogue Tenant” or an “Innocent Violator” and is willing to describe the “case” in a comment to this blog entry?