Shopping Center Must Pay $20K Damages for Violating Tenant’s Noncompete

What Happened: A lease between a shopping center and hair salon banned the landlord from renting to a competing business. The landlord then acquired an adjacent, nearly identical building sharing the same parking lot located only 50 yards away and leased part of it to another hair salon for 10 years. When the original salon tenant found out, it sued the landlord for fraud and breach of contract. The trial court nixed the fraud claim but found the landlord liable for violating the noncompete. The landlord appealed.

Ruling: The Pennsylvania appeals court affirmed the ruling and $20,392 damages award (representing the final eight months of the tenant’s rent).

Reasoning: Under the noncompete covenant, the landlord agreed not to “lease, rent or permit any tenant or occupant of the Premises, other than the lessee, [for] skin care, pedicure, manicure, or hair design/styling services” [emphasis added]. Since the covenant didn’t define “Premises,” the landlord cited the definition in the part of the lease describing the leased property. And since the adjacent building wasn’t part of those “Premises,” the landlord contended that it didn’t violate the covenant.

But the court was having none of it. What sense would it make for any tenant to negotiate for a noncompete covenant that covered only the space it was leasing and didn’t extend to the other parts of the shopping center? Courts shouldn’t interpret leases in a way that leads to “absurd results,” it concluded.

• Allure Hair Designs & Mini Spa, Inc. v. George: 2021 Pa. Super. Unpub. LEXIS 168, 2021 WL 211464