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by Ron Davis

The owners of a Georgia shopping center have gained new life in their battle with a tenant that reneged on its plans to expand its operations at the facility.

The shopping center, Bel-Air Plaza in Americus, has leased space to the tenant--J.H. Harvey Co.--for the operation of a Harvey's supermarket there. And the expansion plans resulted from mutual discussions that began several years ago.

As a result of those discussions, the owners of Bel-Air Plaza began special preparations. They notified several existing tenants that their leases would not be renewed when they expired. They relocated at least one other tenant and refused several prospective tenants who wanted to lease space at Bel-Air Plaza. Finally, they conducted various surveys and analyses and purchased options on adjoining property.

On its part, Harvey authorized its attorney to sign a letter of intent, outlining the "basic terms and conditions of the new, proposed lease" on the Bel-Air Plaza store. In response, Bel-Air Plaza's owners proposed a number of changes to the draft lease and prepared a final agreement.

But the two parties never actually signed a lease for the proposed expansion. Instead, Harvey subsequently notified the owners of Bel-Air Plaza that it was considering the purchase of two existing stores in Americus. And several weeks later, Harvey closed its Bel-Air Plaza store and moved to a newly purchased location.

Harvey has continued to pay rent, but only the minimum amount. (In the past, a large portion of the payment was based on percentage sales.) And the Bel-Air Plaza Harvey's store remains vacant.

The Bel-Air Plaza owners sued Harvey, seeking reimbursement of the expenses they incurred in preparing for the proposed expansion, as well as damages they claim to have incurred as a result of the closing of the Harvey's store.

Harvey counters that under the terms of the shopping center lease, it had every right to close the store. As for the promises made, Harvey simply points out that the parties never entered into a binding lease agreement for the proposed expanded store.

A Georgia Superior Court sided with Harvey on grounds that the two parties never signed a legally enforceable agreement. The owners of Bel-Air Plaza appealed.

A Georgia appellate court overruled the lower court, explaining that "the record creates triable issues as to whether the shopping center's owners reasonably relied upon any promises by Harvey in taking steps to prepare the expansion of its store." The court will thus allow a jury to decide the question of whether Harvey must pay for the assurances it made to expand its store.

As to the question of Harvey's right to close the store, however, the judge upheld the lower court ruling. The judge stated, "Nothing expressly required Harvey to maintain its store on the premises, but instead the provisions weigh strongly against a construction of the contract which would require the tenant to continue its business throughout the term of the lease." (DPLM, Ltd. v. J.H. Harvey Co., 526 S.E.2d 409 [Ga.App. 2000])

Decision: April 2000

Published: June 2000

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