Owner Must Honor Exclusive Despite Use Change

August 31, 2004

A grocery store tenant's lease had an exclusive that barred the center from leasing to another grocery store. A grocery chain bought the rights to that lease and then sublet the space to an appliance store. When the center's anchor moved out, the center began lease negotiations with a grocery store for the anchor's space. The grocery chain sued the center, asking a court to enforce the lease's exclusive and bar the center from leasing to the other grocery store.

A grocery store tenant's lease had an exclusive that barred the center from leasing to another grocery store. A grocery chain bought the rights to that lease and then sublet the space to an appliance store. When the center's anchor moved out, the center began lease negotiations with a grocery store for the anchor's space. The grocery chain sued the center, asking a court to enforce the lease's exclusive and bar the center from leasing to the other grocery store.

An Indiana appeals court ruled that the owner must honor the exclusive, despite the change in use of the tenant's space. The court rejected the center's argument that the exclusive shouldn't be enforced because the grocery chain didn't use the space for a grocery store and its subtenant—the appliance store—wouldn't be harmed if the center leased space to a grocery store. The court said that while the appliance store wouldn't be harmed, the grocery chain arguably would be because it bought the rights to the lease with the exclusive to keep its competitors out of the center. So the center couldn't lease the anchor space to another grocery store [Tippecanoe Assocs. II, LLC v. Kimco Lafayette 671, Inc.].

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