Grand Prospect Partners v. Ross Dress for Less, Inc.

This appeal addresses whether cotenancy provisions in a lease for retail space in a shopping center are unconscionable or unreasonable penalties and, thus, not binding on the landlord. The enforceability of cotenancy provisions has not been discussed in an opinion published by a California appellate court. This opinion does not establish a categorical rule of law holding cotenancy provisions always, or never, are enforceable. Instead, it illustrates that the determination whether a cotenancy provision is unconscionable or an unreasonable penalty depends heavily on the facts proven in a particular case. Here, the facts show the provisions were not unconscionable and only the “rent abatement provision” operated as an unreasonable penalty.

Grand Prospect Partners, L.P. (Grand Prospect), the owner and operator of the Porterville Marketplace shopping center, filed this action to challenge the enforceability of provisions in its commercial lease with Ross Dress for Less, Inc. (Ross). The provisions conditioned Ross’s obligation to open a store and pay rent on Mervyn’s operating a store in the shopping center on the commencement date of the lease, and also granted Ross the…