Consent – Retail Real Estate Law Ruminations

Be Reasonable, Whatever That Means

Why is it reasonable to Ruminations to have steered clear of the “reasonableness” issue, i.e., what does “reasonable” mean? Despite having posted more than 280 times on similar issues, we’ve avoided this question. That’s because, like pornography, we think that when it comes to “what qualifies as ‘reasonable’,” you’ll know it when you see it. [Thanks to Justice Potter Stewart for his concurrence in Jacobellis v. Ohio, 378 U.S. 184 (1964), where he wrote the following explanation of pornography: “But I know it when I see it, and the motion picture involved in this case is not that.”]

We think one has to “see” the circumstances to get a “feel” as to what would constitute a reasonable denial of consent The Alabama Civil Court of Appeals gave us such an opportunity with its August 12, 2016 Opinion in Steve Evans v. W.G. Waldrop, an Opinion that can be seen by clicking: HERE.

There are a number of “main” lessons coming out of this Court’s Opinion and there are some interesting side issues. So, we’ll start with a short version of the story. Our reading of the Opinion shows (to us, at least) that the case was not well presented at trial. Therefore, our telling of the story will “bridge” some gaps and “resolve” some discrepancies in the testimony and in the evidence presented.

A retail tenant with a shopping center lease that ran from April of 1999 until March of 2004 stopped paying its rent in May of 2000 and moved out the next month. Then, it began looking for an assignee or subtenant. After some disappointments, it located someone interested in operating an “electronic-bingo parlor” at the leased premises. [Read more…]

A Different Take On Whether Consent To An Assignment Or Subletting Can Be Unreasonably Withheld

What happens if a lease states merely that a tenant may not assign it or sublet the leased premises? What happens if it says the tenant may do so, but only with the landlord’s consent? A majority of jurisdictions (states), perhaps even a substantial majority, do not require a landlord to be reasonable. Even though there is such a “majority rule,” negotiators need to adapt to the minority view if the leased space is in such a jurisdiction. More importantly, the winds of “do I have to be reasonable” law are shifting. That’s because, little by little, the implied covenant of good faith and fair dealing is encroaching on the grounds where “sole discretion” used to reign. So, in jurisdictions that have required that a party act in “good faith,” even where a landlord has reserved the right to deny its consent for any reason or for no reason at all, it will not be permitted to deny its consent if doing so will defeat its tenant’s reasonably expected benefit of the bargain. Basically, the covenant, as is increasingly being interpreted, prevents a party from using a given contract right as a sword when it was intended to be a shield.

Even if at the time a lease is signed the law in a given place is pretty clear that, absent a lease saying that a landlord has to be reasonable, it can act arbitrarily, that law can change during the lease’s term. Therefore, it makes good sense, in every lease, to define the “rules” for giving or withholding consent even where you think the law is settled. [Read more…]

Subscribe here for automatic updates.

Topics

Recent Comments