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Real Estate – Commercial Lease – Co-Tenant Requirement

Although a commercial lessor’s lease administrator initially agreed with tenant Cost Plus that a shopping center lease required a new tenant as a replacement for Linens N’ Things, an Alexandria U.S. District Court says the plain language of the lease requiring a large co-tenant is satisfied by a Sports Authority store, which was a co-tenant when the shopping center opened, and Cost Plus is not entitled to reduce its rent under the lease.

The court concludes the ongoing co-tenancy requirement and the definition of a Linens N Things replacement are unambiguous, and that the lease agreement does not require that Linens N Things replacement be either a new tenant or occupy the same space as Linens N Things, and that Sports Authority satisfies the definition of a Linens N Things Replacement for the purpose of satisfying the ongoing co-tenancy requirement, following Linens N Things vacating the shopping center in December 2008. The court concludes as a matter of law that plaintiff lessor, Gateway, had at all material times satisfied the ongoing co-tenancy requirement and that Cost Plus breached the lease agreement when it vacated the shopping center on Feb. 7, 2010 and ceased payment of rent. The court reaches this conclusion notwithstanding a letter of March 25, 2009, from Gateway’s lease administrator initially agreeing with Cost Plus that the ongoing co-tenancy requirement was not satisfied. Because the agreement is unambiguous on its face, the statement of the lease administrator is nothing more than an erroneous conclusion about what the agreement means.

Given the lease agreement’s merger clause and the court’s conclusion that the lease agreement is unambiguous, there is no prospect that additional discovery would establish a genuine issue of material fact that would preclude summary judgment as to liability.

Partial summary judgment granted to Gateway, plaintiff lessor.

Gateway Center IV LC v. Cost Plus Inc. (Trenga, J.) No. 1:10cv00063, April 15, 2010; USDC at Alexandria, Va. VLW 010-3-212, 7 pp.

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