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Zoning Argument All "Whet"
by Ron Davis

The excuse that a tenant of a South Dakota shopping center used to prematurely terminate her lease has landed on obviously-shaky ground. The shopping center, Milbank, SD's Whetstone Mall, had leased space to the tenant for the operation of a computer store. The tenant's efforts to terminate her lease began just months after she signed the three-year agreement.

She apparently realized that her business needed more space than what was available at Whetstone Mall, so she contacted the mall's property manager to relate her plans to leave. In a subsequent letter to the property manager, the tenant stated that she had learned that Whetstone Mall is in an area "not zoned for retail." Therefore, she added, she had every right to terminate her lease. That excuse has some substance: Whetstone Mall may, in fact, be located within a property zone that excludes retail operations. Yet, among the tenant mix at Whetstone Mall are a video rental store, a tanning salon, an investment brokerage firm, a cellular phone business and a service station.

Moreover, the city of Milbank has never notified even a single Whetstone Mall tenant - including the computer store tenant - that it was violating any zoning laws. Finally, exceptions to the zone in which the Whetstone Mall is located, "include, but are not limited to, such facilities as drug stores, gift shops and restaurants," as well as, "various businesses, offices, contractor shops and other uses which in the opinion of the Planning Commission are of the same general character as those previously enumerated." The owner of the Whetstone Mall sued the tenant to prevent her from terminating the lease without fair compensation, but a local county court decided in favor of the tenant. On appeal of that decision, the South Dakota Supreme Court overruled the lower court, explaining, "There is no dispute that the tenant used the premises for a computer store for a considerable period of time without any problems arising with the city involving the use. The only time the issue of legality of use came up was when disputes over the liability regarding leases payments surfaced." (Bohlen v. Tyler, 641 N.W.2d 134 [S.D. 2002])

Decision: March 2002
Published: May 2002



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