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Void For Uncertainty
by Ron Davis

A tenant’s struggle to prevent conversion of its North Carolina shopping-center site to full local government use has failed.

The shopping center is Freedom Mall, in Charlotte. And the retailer—Simply Fashion Stores, Ltd.—had leased space at the facility beginning in 2000. That’s when the center’s owner and the tenant agreed, as part of the lease, to a “termination clause.”

That clause gave the center’s owner the right to terminate the lease if the property is sold to a buyer that intends to convert the property to a nonretail use. The only stipulation to such early and unilateral termination was that the owner had to give the tenant a 120-day notice of such action.

In 2004, the local county bought Freedom Mall and became the successor to all the tenants’ lease agreements. Simply Fashion, however, continued to operate at the facility—and in 2005 even signed a new five-year lease that extended tenancy until 2010.

But in 2008, the county informed Simply Fashion of plans to convert Freedom Mall strictly to local government use. In so informing of those plans, the county asked Simply Fashion to voluntarily terminate its lease and offered $21,813 as compensation.

Simply Fashion rejected the offer. In response, the county sued to condemn Simply Fashion’s leasehold interest in Freedom Mall.

Simply Fashion argued, however, that its lease with the center guaranteed tenancy until 2010 and therefore the court must honor that guarantee. As to the 120-day-notice requirement for early termination, Simply Fashion contended that such notice applied only to the original owner of Freedom Mall and not the new owner.

But Simply Fashion may have overlooked one modification of the original lease. That modification, which Simply Fashion apparently failed to oppose, stated that the two parties were renewing the lease “upon such terms as may be agreed on,” which “is altogether void for uncertainty.” Based on the court’s interpretation of that modification, that meant that Simply Fashion did not have the right to a second extension.

A North Carolina court thus ruled that the county is legally enabled to terminate Simply Fashion’s lease with only a 120-day notice, but that a jury could determine just compensation to Simply Fashion as a result of that lease termination.

Simply Fashion appealed that ruling.

A North Carolina appellate court upheld the lower-court ruling, explaining, “The lower court did not err in finding that Simply Fashion did not have a right to a second extension, that the county had the right to exercise the termination clause, and that the findings of fact and conclusions of law are binding upon the parties.”

(Mecklenburg County v. Simply Fashion Stores, Ltd., 2010 WL 5419102 [N.C.App.])

Decision: December 2010
Published: January 2011



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