Last week and the week before, we wrote about some substantive aspects of exclusive use covenants – promises by a landlord to its tenant that only that tenant will be permitted to sell certain goods or services at the shopping center. Our goal was to point out some of the difficulties and challenges faced when writing rules as to what can and can’t be sold and the extent to which certain other tenants could be free, in some or all regards, of those crafted restrictions.

We received some direct comments and a number were posted to various other web sites, notably on those hosted by Linked In. We also received some private comments. Most focused on the remedies an aggrieved tenant might have against its landlord if the landlord’s covenant (promise) was broken. None (yet) addressed how, when, and with what success a “protected” tenant might directly act against a neighboring tenant alleged to sell those goods or services even though the neighboring tenant knows or should know of the restriction. We promise to discuss this within the next few months, but not now. We’re waiting for a friend’s law review article to be published so that we can point interested readers to a “real” legal analysis, not just this Ruminator’s ramblings. [Read more…]

What would you think if Ruminations told you that it is perfectly fine in California for a tenant to terminate its lease if a co-tenancy condition isn’t met, but not to exercise a rent waiver, even if it hasn’t opened its store? Well, we’re telling you that based on our seeing a January 12 court decision from a California Court of Appeal. The case is Grand Prospect Partners, L.P. v. Ross Dress For Less, and the decision can be seen by clicking: HERE.

Uncharacteristically, we’re aiming for a “short one” today. [We’ve missed.] So, lawyers and law buffs should certainly take a look at the court’s opinion. It is rich with “real” legal analysis, though we think it is far short when it comes to the court’s understanding of commercial reality. What is more, the court’s analysis doesn’t seem to be limited to co-tenancy remedies; it could be equally applicable to agreed-upon remedies for violation of exclusive use rights or access violations.

The keystone to today’s blog posting, and to the court decision that led to it, is the legal concept of an “unreasonable penalty.” We’ve written about this before in the guise of what is known as a liquidated damage. Search Ruminations using “liquidated damage” as a search term. But, now, to the story. [Read more…]