For commercial landlords and their retail tenants, shopping centers operate like ecosystems, with each retailer occupying its own ecological niche.
Successful centers typically have some stores that cover a lot of square footage and sell a wide variety of products at competitive prices, without specializing in any particular line of merchandise.
These anchor tenants attract regional shoppers who also patronize smaller stores that sell specific kinds of goods, such as household furnishings, clothing, or pet supplies. Add some restaurants, specialty shops, and banking and financial establishments, and the resulting tenant mix can generate customers and sales, creating a win-win-win for the center’s developers, investors, and retail tenants.
Even Housing Can Be Restricted
To achieve this success, many retail tenants require landlords to prohibit or limit certain activities within the center.
Noxious uses such as composting centers and fireworks factories are clearly undesirable and will be prohibited. But many valued, consumer-friendly uses are also routinely banned from shopping centers.
Examples include schools, places of worship, and fitness centers, which can contribute to disruptive parking and traffic problems. Even housing on nearby properties controlled by landlords is often restricted, because homeowners and residential tenants can file nuisance complaints about the noise, odors, lighting and rodents associated with shopping centers.
Landlords and tenants should not rely on local zoning laws to restrict undesirable uses at shopping centers. Zoning laws can be compromised by zoning amendments, variances and lax enforcement.
The most effective way to prevent unwanted activities is through binding agreements added to leases and restrictive covenants, which give landlords and tenants legal rights to directly seek court orders enjoining problematic uses, without depending on local government action.
In addition to prohibiting noxious and other incompatible uses, major tenants usually insist that shopping center leases grant them exclusive rights to operate their stores without competition from other tenants. Many retail leases include lengthy interlocking lists of prohibited uses, exclusive uses and permitted uses, designed to regulate which tenants can sell what products and services.
This can result in complicated and confusing regimes of exclusive use clauses in multiple leases, so retail landlords often must ask existing tenants for consents or waivers, before bringing in new tenants to fill vacant space.
Landlords Have Legal Options
When so-called “rogue tenants” disregard exclusives, many retail leases obligate landlords to file suit and seek injunctive relief against the violators. Those leases frequently allow aggrieved tenants to claim rent abatements, liquidated damages or lease termination rights against landlords that fail to stop rogue tenants.
It can be frustrating for landlords when tenants with exclusives default, abandon their premises or “go dark” (that is, cease operations without relinquishing their space).
Landlords negotiating exclusives should reserve for themselves rights to terminate exclusives when tenants are not utilizing them, so the landlords can find other tenants willing to offer the goods and services that non-operating tenants cease to make available.
From the tenant’s perspective, exclusive rights must be vigilantly guarded, and aggrieved tenants should promptly contest violations. Specialty Retailers, Inc. v. Main Street, NA Parkade, LLC, decided by a federal court in Massachusetts in 2011, is instructive.
Specialty Retailers’ commercial lease prohibited its landlord from leasing more than 5,000 square feet in a North Adams shopping center to another tenant selling off-price merchandise. Despite this restriction, the landlord signed a lease with Label Shopper, an off-price retailer. Specialty Retailers acquiesced in this violation for 18 months, and even negotiated an amendment to its lease during that period, before taking action to enforce its exclusive.
A jury agreed that the landlord’s lease to Label Shopper breached Specialty Retailers’ exclusive, but found that Specialty Retailers waived its right to contest the breach because it waited too long to contest Label Shopper’s operations.
Specialty Retailers asked the judge to set aside the jury verdict, arguing that its decisions on enforcing exclusives were made at its corporate headquarters in Houston, where its executives were unaware of the violation. Specialty Retailers maintained that it lacked sufficient knowledge of the violation to waive its exclusive.
The judge disagreed with that argument, observing that Specialty Retailers’ vice president of operations, district manager, and on-site personnel knew about Label Shopper’s business activities long before objecting. Therefore, the jury could attribute their knowledge to Specialty Retailers as a corporate entity. The judge upheld the jury’s verdict on the waiver issue.
The lesson here is that national retailers with faraway corporate offices should make sure they have local eyes on the ground to monitor compliance with exclusives. If retail tenants snooze, they can lose.
Download the article as seen in Banker & Tradesman on April 27, 2026. Learn more about Christopher R. Vaccaro.