The Law

Definition “Shopping Center” by Ron Davis Owners of a California shopping center have learned the hard way how difficult it can be to properly define the property they lease. That’s true for the present—but even more so for the future. As proof, consider the lengthy conflict between that shopping center, Manteca Lifestyle, and one of its tenants, a Best Buy store. The grievance between the two actually began several years ago. At that time their agreement did seem to favor the shopping center owners. That’s because they did not require “open for business” notification unless 60 percent of the gross leasable areas of the shopping center are open and operating. Despite that somewhat favorable situation for the center owners, Best Buy nevertheless decided to open for business at the shopping center. But that move was conditional. And the basis changed when, instead of the full rental payment, Best Buy paid only 50 percent of the required amount. The shopping center owners then threatened to evict Best Buy and demanded payment of “back rent.” Explained the shopping center’s owners, the center’s construction was not fully completed but soon would be. That information persuaded Best Buy to remain a tenant, though a reluctant one. Nor did that end the quarrel. There was still the ongoing conflict between landlord and tenant, and the center’s owners threatened to evict Best Buy unless Best Buy pays 100 percent of the monthly rent. Moreover, the owners added, more than sixty percent of the buildings were fully constructed, were open and currently operating. In response, Best Buy reluctantly paid the amount of rent demanded, but under protest. Best Buy then sued, arguing that the center’s owners had erred in their understanding of just what a shopping center actually consists of. They argued that a shopping center must be defined as those buildings in the proposed site plan. Best Buy added that such a definition the co-tenancy has not been met and we are to pay 50% fixed and additional rent. That’s when the courts entered the dispute. A district judge stated, “Although the lease does provide the shopping center owners with the discretion to construct the shopping center at various times and in various phases, this does not preclude Best Buy from pleading a claim of breach of the implied covenant of good faith and fair dealing. …It is therefore ordered that the Manteca Lifestyle motion to dismiss the lawsuit be hereby denied.” (Best Buy Stores L.P. v. Manteca Lifestyle Center, LLC, Not reported in Supp.2d, WL 1949482) Decision: January 2017 Published: February 2017