Use of Specific Tenant's Name Binding on Owner

Facts: A shopping center owner and a women’s clothing store signed a lease for space next to a large national bookstore. The lease’s cotenancy provision allowed the tenant to abate its minimum monthly rent if the bookstore stopped operating. After several years, the bookstore moved out of its space; the owner replaced it with a bargain bookseller and then a university bookstore.

When the bookstore named in the lease stopped operating, the tenant began paying the lower monthly rent that it claimed it was entitled to under the cotenancy clause. The owner sued the tenant for breach of contract, arguing that when it replaced the bookstore with two other types of bookstores, the tenant was required to resume paying full rent. The owner and tenant each asked a trial court for a judgment in its favor without a trial.

Decision: A Connecticut district court ruled in favor of the tenant.

Reasoning: The tenant contended that the terms of the lease clearly and unambiguously entitled it to pay reduced rent so long as the specific bookstore named in the lease didn’t occupy the center. The owner said that nomenclature was used to denote that the particular space in question must be leased to a bookstore, and not some other type of business, such as a clothing store or shoe store—but that didn’t mean that the space had to be leased to the specific bookstore named in the lease.

The court said that because the owner and tenant were both sophisticated companies there was a presumption that the language used in the lease, including in the disputed cotenancy clause, was definitive. It noted that their choice to name a specific bookstore rather than to use a description of the bookstore’s premises showed that the intention was to make the specific bookstore the crux of the cotenancy right.

The court said that, had the tenant and owner intended to define the big-box bookstore to refer to the space that it occupied rather than to the retailer itself, or an equivalent retailer, they would’ve done so. The court’s decision was also affected by the fact that the owner and tenant chose to name specific retailers in other parts of the center, as well. “Those terms are not ‘mere proxies’ for the physical space occupied by them in the center,” said the court.

• Kleban Holding Co., LLC v. Ann Taylor Retail, Inc., Nov. 2013