A commercial tenant emerged victorious in a dispute pertaining to the exclusivity provision in the tenant’s lease agreement because it had a reasonable basis for the restrictive term’s inclusion in the contract. The 1st District Court of Appeal concluded that a legitimate business interest existed to justify allowing the tenant to insist on a lack of direct competition for the entire duration of its five-year lease and three five-year renewal options.
Omni Amelia Island, LLC owned and operated the Shops of Amelia Island Plantation, a “shopping village” within Omni’s Amelia Island Plantation Resort. Omni leased a space within the Shops to PLaE, the only full-service restaurant inside the shopping village. The lease contained an exclusivity term preventing the landlord from bringing in any tenants who would operate a full-service restaurant within the village.
Lease renewal negotiations broke down, and each of the tenant and landlord sued the other. The trial court ruled that the tenant was entitled to renew the lease, but it also concluded that the landlord was no longer bound by the exclusivity provision.
On appeal, the restaurant emerged successful. The trial court had decided that Section 542.335 of the Florida Statutes prohibited enforcement of the exclusivity term of the lease. That law prohibits restrictive contractual provisions that are not “reasonable in time, area, and line of business.” In the restaurant’s case, the trial court had decided that the lease was not reasonable in terms of time and had thrown it out on that basis.
The appeals court, however, questioned whether Section 542.335 applied to this situation at all, since “the law appears directed at personal covenants not to compete.” Even if the statute applied to the restaurant’s lease agreement, the tenant was still entitled to enforce the exclusivity provision.
The statute states that a party attempting to enforce a restrictive covenant (such as the exclusivity provision in the restaurant’s lease) must prove that one or more legitimate business interests exists to justify the term’s presence in the agreement. The long duration of the tenant’s exclusivity rights was legitimate because, as the previous landlord testified before the trial court, the restaurant had to make such a “substantial initial investment … in the property.” Holding the right to insist on a lack of direct competition for a period of 20 years was necessary to make the restaurant’s large up-front investment viable and “to sustain the ups and downs of the resort restaurant business.”
Based on this evidence, the tenant had ample proof to establish that the long duration of the exclusivity term existed as a result of a legitimate business purpose and was enforceable.
Hammering out a commercial lease that makes business sense for you (as either a landlord or a tenant) may be only the first step in ensuring the success of this business arrangement. Sometimes, it is not only a matter of consummating the agreement but successfully defending it as well. For knowledgeable advice and determined representation regarding your commercial leasing issues, contact the Florida real estate law attorneys at Stok Folk + Kon. Our attorneys can help you ensure you retain the benefit of the deal for which you bargained.
Contact us online or by calling (954) 237-1777 to schedule your consultation.
More blog posts:
Types of Recovery Available to a Florida Commercial Tenant When the Landlord Breaches the Lease, Florida Business Lawyers Blog, June 26, 2015
When You Can (And Cannot) Escape Your Florida Commercial Lease Early Under Constructive Eviction, Florida Business Lawyers Blog, June 4, 2015