Editor’s note: this is part of an NRTA series regarding tenants’ rights when a shopping center loses occupancy levels. The introduction can be found here.
Although small business tenants typically can’t rely on state common law to assert rights contrary to the language of the lease, they can use common law to support arguments based on the lease. It could also be used to fill in gaps not addressed in the lease.
Principles to Apply
For example, if changes in a shopping center cause a landlord to breach a specific clause in the lease (for example, a requirement to provide the center with specific characteristics), a tenant can file a lawsuit for breach of contract and seek damages. If the changes to the shopping center are so significant that you can’t operate your store as contemplated under the lease, you may have the right to terminate your lease. This would be based on the common law principles of constructive eviction, failure of consideration, or impossibility of performance.
Likewise, if the landlord has done something to undermine the tenant’s value in its lease, such as opening a competing center nearby, the tenant can argue that the landlord has breached the covenant of good faith and fair dealing, which is a trait implicit in every contract.
What to Do
You should identify facts that might support a tort claim against the landlord. A landlord can’t lie to the tenant to entice the tenant to enter into or renew a lease. If a landlord misrepresented occupancy rates or said that specific tenants would be leasing space at the shopping center, then you may have a claim for fraud. Make sure to retain all records relating to the landlord’s presentations. Even if you can prove that the landlord misrepresented facts, you will have the additional hurdle of proving that the lease agreement does not supersede any prior promises by the parties.
For more information, contact the NRTA office at (413) 525-4565 or by filling out this form.