Trial Needed to Determine Whether Site Plan Change Was Permissible

Facts: The lease between a multiple-phase shopping center owner and national tenant indicated that the tenant would occupy a space in building A of phase one in the not-yet-constructed property. The lease contained certain provisions concerning the construction process and the future tenants of the center. The owner was permitted to change the configuration or location of the buildings on the lease plan as long as the changes wouldn’t adversely affect the tenant’s business or render the center substantially different from how it appeared in the attached lease plan.

Another provision—the cotenancy requirement—guaranteed that certain co-tenants would be operating at the time the tenant opened for business. Also, 70 percent of the remaining leasable area within the center must be open and functioning as “Required Tenants.”

If either of the two requirements wasn’t met, the lease allowed the tenant to either delay its opening, or go forward with opening at a “Substitute Rent in lieu of Rent.”

At some point after the parties executed the lease agreement, the owner reconfigured the lease plan—specifically the buildings in phase one where the tenant was to be located. This reconfiguration decreased the overall size of the buildings containing the three inducement tenants that prompted the tenant to rent space there. The three inducement tenants opened in all of the allotted space under this reconfigured plan. Because all three inducement tenants were fully staffed, stocked, and operational in substantially all of their respective premises by the deadline, the owner believed that it met the initial cotenancy requirement.

The tenant asserted that the changes to the plan constituted a failure to fulfill the requirement. Accordingly, the tenant exercised its option to pay a lower substitute rent instead of full rent.

The owner sued the tenant and asked a trial court for an injunction—that is, an order requiring one party to do or not do something—that would force the tenant to pay full rent.

Decision: A Washington trial court ordered a trial to determine the issues.

Reasoning: The tenant argued that once the owner made changes to the shopping center that deviated from what was shown in Exhibit A attached to its lease at the time it signed, it failed to meet its initial cotenancy requirement. The owner disputed this interpretation, contending that the lease allows it to alter the lease plan and still comply with the initial cotenancy requirement. Thus, the owner asserts that it met the initial cotenancy requirement by having all inducement tenants operating in “substantially all of their respective premises under the Lease Plan that it was entitled to reconfigure under the lease.” 

The trial court found that the language “as shown on the lease plan” is subject to more than one reasonable interpretation. First, nothing in the lease itself suggested one way or the other whether the referenced “lease plan” had to be the exact version attached as Exhibit A. In other words, the plain language could be read to support either side’s interpretation—that the “lease plan” must be the version memorialized as Exhibit A—or the owner’s interpretation—that the “lease plan” simply refers to a version of the lease plan. “Indeed, read in conjunction with the lease’s reservation of the right to alter, it is reasonable to believe that parties may have anticipated the lease plan changing,” said the trial court. The trial court concluded that the “lease plan” language was ambiguous.

The trial court determined that, in light of the entire contract, both parties’ interpretations are reasonable at this stage of the construction. Specifically, because the lease agreement was signed before construction began, the contract in several places contemplated the possibility of change. Therefore, a trial was needed to determine whether the lease had been breached by either party.

• Smokey Point Commercial, LLC v. Dick’s Sporting Goods, October 2017