Part and Parcel
by Ron Davis
The owner of an Arkansas shopping center must accept the conditions of an unwanted sublease that a tenant had cleverly designed for legal compliance.
The shopping center, located in Russellville, is owned by Holytrent Properties, Inc., which originally leased the property to Wal-Mart Stores, Inc. Wal-Mart, in turn, eventually assigned the lease to Valley Park Limited Partnership. And Holytrent never objected to that assignment.
But then Valley Park decided to sublet the buildings to National Home Centers. The original lease allowed the subletting of "any part" of the shopping center without the consent of Holytrent. Subletting of the entire property, however, had to have Holytrent's written consent.
Apparently to avoid any conflict with Holytrent, Valley Park's principals devised a sublease that allowed them to retain a small parcel in a corner of the shopping center's parking lot. And they never told Holytrent of the sublease to National Home Centers. National Home Centers then signed the sublease and began operations.
It wasn't until just prior to the expiration of the original lease that Holytrent learned of the National Home Centers sublease. That's when Valley Park notified Holytrent that it was exercising its option to extend the lease term. The original lease permitted such an extension without the consent of Holytrent.
Holytrent refused to agree to an extension and attempted to evict National Home Centers. Valley Park responded by suing to force Holytrent to comply with the terms of the lease.
An Arkansas appellate court, in ruling in favor of Valley Park, explained, "The two parties plainly and unambiguously agreed that Holytrent's consent to a sublease need not be obtained if the lessee [Valley Park] subleases 'any part' of the leased premises. The sublease to National Home Centers covered 100 percent of the buildings and 88 percent of the overall property.... Thus, it is undisputed that Valley Park subleased only part of the leased premises. While Holytrent may now consider the contract language susceptible to being taken advantage of, its plain meaning is clear and should not be enlarged on by construction." (Holytrent Properties v. Valley Park Ltd., 32 S.W.3d 27 [Ark.App. 2000])
Decision: November 2000
Published: February 2001