PROPERTY (Section 1)
Spring Semester 2013

Issues Arising from Use of the Premises
Reading Assignment: Pages 432-440

1. L is negotiating with T for a five-year lease. T plans to operate a shoe store. L's submits a proposed lease to T that provides "T covenants to use the premises as a shoe store and for no other purpose." What legal and practical reasons would explain L's desire to constrain T's use in this fashion? [List as many as you can think of.] In contrast, what legal and practical reasons might cause L to instead opt for a provision that instead stated "T may use the premises for any legal purpose"? [In thinking about this question, consider it from the reverse perspective. What would be the benefits/disadvantages to T if T covenanted to use the premises "as a shoe store and for no other purpose"? If T could use the premises "for any legal purpose"?]

2. Barnes rents a 3-bedroom apartment in an upscale residential apartment community. He begins using the third bedroom in his apartment as an office for his life insurance sales business. One day Landlord is calling Barnes to advise him of an upcoming pest control spraying, and Barnes answers the phone saying "Barnes Insurance." When Landlord confronts Barnes, Barnes admits using the third bedroom as his office. The lease provides that "Tenant shall use the premises for residential purposes only, and for no other use." Has Barnes breached this provision? Why or why not?

3. What was the purpose of the use restrictions in the DVM Co. v. Bricker case? How would they benefit the Landlord? How might they have benefited the Tenant? Do you agree that the Tenant breached the lease and that this justified termination of the lease?

4. Wal-Mart signs a 20-year lease to be the primary tenant in the new Highway 40 Plaza. During the third year of the lease, Wal-Mart signs a 20-year lease to be the anchor tenant of the new Kroenke Center, which is located directly across the street from Highway 40 Plaza. Wal-Mart closes its Highway 40 store, but Wal-Mart keeps paying rent on the space and declares its intention to continue doing so for the remaining 17 years of the lease term. Wal-Mart's lease is silent as to whether Wal-Mart is obligated to actually operate a Wal-Mart store during regular business hours. The landlord of Highway 40 Plaza sues Wal-Mart, seeking a declaratory judgment that Wal-Mart has breached the lease and that the landlord can thus terminate the lease. How should the court rule? What additional information would you need, and how would it influence your analysis?

5. Assume that your client (owner of a shopping center) is negotiating with Target on the terms of a lease. Target refuses to include an express operating covenant in the lease. What alternative suggestions would you propose that might protect your client against the economic risks posed by a decision by Target to "go dark" during the term of the lease? [Come up with as many suggestions as you can.]