The reasonableness of a restrictive covenant in a lease is examined in terms of its scope and effect.
The tenant operated a general store in a shopping center owned by the lessor. The lease agreement prohibited the lessor from leasing space in the shopping center to any other business which derived more than 25 percent of its sales from hardware, housewares, automobile, electoral and plumbing supplies, toys, home furnishings, appliances, sporting goods and paint. The tenant learned that the lessor intended to lease space in the shopping center to a dollar store and auto supply store. The tenant sought an injunction prohibiting the leases to the dollar and auto stores that potentially would put the shopping center in violation of its agreement with the tenant. The trial court denied the injunction and held that the lease provision in question was too broad to be enforced. The tenant appealed.
Is the lease too broad to be enforceable?
The court reversed the trial court's judgment and remanded. The court held that restrictive covenants were enforceable in a lease as long as they were reasonable. The court held that the restriction in question was not unreasonable because it affected only one shopping center and did not adversely affect the public interest. The court held the lease provision was clear and unambiguous.