The Law

A Hairy Case by Ron Davis Did a tenant of a Delaware shopping center have the legal authority to operate his business there? If not, could that tenant nevertheless demand exclusive rights to prevent competitors from also leasing space at the center? As bizarre as those questions might seem, they actually arose when the principals of Middletown Square shopping center in Middletown leased space to the owner of a hair-care business. That lease provided for the operation of a “full-service hair and beauty salon with retail sale of hair products and accessories.” But, oddly enough, one of the center’s so-called “general provisions” prohibits the operation of a beauty salon at the property. Undeterred by that prohibition, the tenant obviously decided that the exclusivity provision simply bars any other beauty salon from operating in the shopping center. A year later, the tenant learned that another business at the shopping center had expanded by adding hair-stylist services. That business then supposedly began adding still other hair-care offerings. For the next several months, the beauty-salon tenant made repeated attempts to contact the center’s management to report the competition. His argument was that center’s management had reneged on a non-compete arrangement. Eventually, he was unable to resolve the conflict in a manner he deemed acceptable. And he therefore decided to cease operations at the center. The response to the tenant’s departure from the center was a lawsuit. The center management contended that the tenant had defaulted on the lease agreement by failure to pay all rent due and then abandoning the salon space prior to the termination of the lease. Management demanded that the tenant pay total retribution of $76,175.15. The tenant countered with charges that the center’s management breached his lease by allowing a competitor to operate at the shopping center. He demanded that management make payment to him of $144,600.00 to cover the fair-market value of his business and his return of the security deposit he made at lease signing. That’s when the center’s management pointed to the wording of the exclusivity clause in the center’s general provisions that prohibit the operation of a beauty salon by any tenant of the shopping center. A Delaware court considered the exclusivity clause as binding, ruling, “[N]o language, either express or implied, could be construed as creating an agreement…granting [the tenant] the exclusive right to operate a beauty salon at the shopping center. Rather, to the contrary, the Rules and Regulations explicitly prohibit the operation of a beauty salon by any tenant of the shopping center.” The court nevertheless decided that the tenant was accountable to the terms of his lease agreement and so must pay all rent due on his the rental space. (Middletown Square Associates, LLC v. Jasinski, 2012 WK 6042639 [Del.Super,]) Decision: December 2012 Published: January 2013