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Drug(store) Overdose
by Ron Davis

Leasing space to drug store competitors has caused a double dose of financial problems for the owners of an Iowa shopping center.

The owners are partners of Uptown Shopping Center in Des Moines, and the problems began shortly after they bought the property in 2000 and rewrote the lease of a drug store tenant there, then later leased space to another drug store operator.

Soon, the original drug store tenant sold her business to her competitor at the shopping center and stopped paying rent. Three years later she sued the shopping center owners for “violations of good faith and fair dealing.” Specifically, she claimed that the shopping center owners failed to comply with standards of good business practices and interfered with her “prospective business advantages.”

The shopping center owners responded with a counterclaim, accusing her of breach of lease and abandonment of her leased premises. They also demanded that, based on the terms of the lease, she pay all legal fees associated with the lawsuit.

A jury found that the tenant did not breach the lease agreement. The jury members therefore decided that the shopping center owners must pay the tenant $77,487.99 for her costs in relocating her business.

The shopping center’s owners appealed, arguing primarily that the tenant should be responsible for paying the attorney fees incurred in the lawsuit. In fact, their lease stated that the tenant must pay the shopping center owners’ attorney fees for “enforcing or defending” their rights because of a breach of lease.

An Iowa appellate court ruled in favor of the tenant, explaining, “The partners cannot recover attorney fees because they failed to prove a breach or default by the tenant as required. The lease clearly states, in part, ‘because of any breach’ the tenant must pay those fees. No breach was established in this case.” (Horton v. Uptown Partners, L.P., Slip Copy, 2007 WL 3377029 [Iowa App.])

Decision: November 2007
Published: December 2007



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