“Another Similar Major Tenant” – What Did You Say? A Co-Tenancy Failure Saga

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Last week, we described, in some detail, a long story about a tenant seeking the benefit of a continuing co-tenancy provision in its lease and its landlord’s less than favorable response. We’re not going to repeat the “long story” this week. If you want to read it (to catch up, and you should), just click: HERE. Today, readers get the “short” version.

A shoe store’s lease gave it the right to pay reduced rent and even to terminate its lease if either of two particular businesses at the property vacated and were not timely replaced by “another similar major tenant.” The dispute, which was narrowed by a United District Court, but not resolved to conclusion, was whether a particular bible book store that replaced one of the designated “co-tenants,” a women’s fashion retailer, satisfied the criterion of being “another similar major tenant.” There were also issues of whether the shoe store’s long delay in “complaining” would adversely affect the specific remedies the tenant got under its lease.

The bible book store was long established in the marketplace and had relocated from a nearby location into the entire space occupied by the fashion retailer. Its sales in that same space exceeded those of the fashion retailer it replaced. [Read more…]

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Why Do You Think Your Lease’s Audit Clause Provides Any Benefit Or Protection?

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Audit clauses in leases are not throw-away provisions. They are not something to be copied from the last document and the one before that and so on. While intended by landlords to “make” pass-through cost billings “final,” as often written, they won’t satisfy that purpose. Similarly, a tenant or other kind of occupant who wants to “contain” its landlord’s right to audit sales records for percentage rent purposes also may want to read what follows. For simplicity (and because the overwhelming number of such situations involve tenancies), we’ll speak of tenants and leases, but the same concepts apply to Covenants, Conditions and Restrictions (CC&Rs) and similar, but differently named, documents. [Read more…]

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