Rental Restriction on Owner Not Enforceable

A grocery store tenant's lease restricted the owner from renting space in its center to another grocery store. The tenant later assigned its lease to a supermarket that wanted the space only to keep out competitors. The lease was later assigned to a company owned by the family who controlled the supermarket. Since 1984, an appliance dealer has been subletting the space. When a large tenant moved out of the center, the owner wanted to rent that space to a grocery store. But the supermarket's assignee tried to enforce the restriction against the owner.

Indiana's top court ruled that the restriction was unenforceable. The court said that since the space had stopped being used as a grocery store years ago, there was no longer any “interest within the center for the restrictive covenant to protect.” The court reasoned that the supermarket's voluntary abandonment of the space negated the restrictive covenant. Also, the court noted that the assignee's attempt to enforce the restriction showed that it expected sales to flow to any new grocery store that moved into the center. “It follows that the convenience of the public and certainly the interest of the [owner] are served by having a grocery store in the center,” said the court [Tippecanoe Assoc. II, LLC v. Kimco Lafayette 671, Inc.].