Imagine you leased a large space at a shopping center for your sports bar and restaurant. In that lease, you negotiated for the right to be the only “sports themed restaurant/bar larger than 5,000 square feet” at the shopping center. About four years later, a new, 7,000 square foot tenant signs a lease “for the purposes of operating [] indoor golf simulators, to include the sale of golf-related apparel, a ‘fast casual’ restaurant, and a bar.” You might be a little on edge until you see that the new tenant’s lease included just what you had bargained for. It included that this golf-related tenant “may not, among other restrictions, use its premises for ‘a sports themed restaurant/bar larger than 5,000 square feet.’”
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Some weeks we Ruminate more than others though we freely admit it may be hard to tell the difference. So, here’s more than a clue. This is a big Ruminating week.
Many businesspeople reach agreement as to a principle expecting that someone else will express it in words that can be understood, in a common way, by others. So, when it is agreed that a landlord will not allow any “diner similar in concept to the tenant’s diner,” what were the landlord and tenant agreeing-upon? We would think that the tenant didn’t want competition in the form of having another restaurant that drew on the same kind of customer base. Of course, every restaurant competes with every other one, but the marketplace distinguishes between Michelin 3-star establishments and burger joints. That’s a key point whenever an exclusive use restriction is on the bargaining table.
Don’t expect cut and paste clauses today because we’re only going to do some conceptualizing. Once it is settled that a tenant will get the benefit of an exclusive use right, its landlord needs to make sure that its own ability to make a living isn’t imperiled. We’re not going to discuss whether landlords should grant exclusive use rights because sometimes that just what needs to be done to get the rent for an otherwise empty space.
7th Circuit Court of Appeals Judge Richard Posner has written an essay in the 
Ruminations has been discussing what should happen when a tenant’s exclusive use right is breached. One of the remedies suggested in prior postings, as well in reader’s comments, is the tenant’s right to terminate the lease. That’s a remedy brought up in other contexts as well. So, it seems appropriate to discuss the “lease termination remedy” in a somewhat general way, not just when it come to exclusive use rights. 
With the help of some readers, Ruminations is spiraling in on a unified theory about remedies a “violated tenant” might have against its landlord and others for the breach of an exclusive use right granted to the violated tenant in its own Lease. We’re going to start with possible remedies against the landlord because that’s the most discussed facet of this topic when reaching a deal and when negotiating a lease. The agreed-upon remedies are important to lenders and buyers as well because what is agreed-upon can affect the economics of sales and financing transactions. For an example, think about the effect on the shopping center buyer in the Office Depot case discussed in the Ruminations entry of July 25, 2011. 
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