A landlord, L, owns Whiteacre, a tract of land that contains a building plus a parking lot. L leases Whiteacre to a tenant, T, for use as a grocery store. The lease is for a 10-year term, at a rate of $3,000 per month. The lease describes the property as, “That tract of land known as Whiteacre, consisting of one commercial building and one hundred (100) parking spaces.”
The lease prohibits T from assigning or subleasing the premises, but the lease contains no restrictions on L’s right to alienate Whiteacre. The lease requires L to make any major repairs to the building, and to maintain the parking lot’s surface. L records this lease in the local recorder’s office, where all records related to interests in real property are kept, as required by law.
After one year, L decides to sell Whiteacre to X, who is a direct competitor of T in the grocery business. T objects to L’s plan. T tells L that T is uncomfortable having a competitor as T’s landlord. L nevertheless proceeds with the sale. After the sale to X, T continues to occupy Whiteacre, and to pay rent to X at $3,000 per month.
The parking lot on Whiteacre is bounded on one side by a state highway. One year after the sale to X, the state decides to widen the highway. To do so, the state exercises its lawful power of eminent domain to condemn a strip of land 30 feet wide along the edge of the parking lot. This reduces the number of available parking spaces from 100 to 65.
The applicable law requires the state to compensate for any taking by placing the condemnation award in escrow. All parties with a legal interest in the property must then agree on how to allocate this award among themselves. If the parties cannot agree, then a judge is appointed to decide the matter.
Following this procedure, the state escrows $50,000 for taking the land from the parking lot. Assume that this amount is legally sufficient compensation for the taking.
T believes that the reduction in parking spaces will hinder T’s business. The lease is silent as to the effect of condemnation on the parties’ rights and obligations. Nevertheless, T asks X for an abatement of the monthly rent to compensate for the loss of parking. X refuses.
At the same time, T notifies X that the remaining surface of the parking lot has become badly cracked. T asks X to repair the pavement. X refuses this request, as well, stating that X is not bound by the terms of the lease between L and T. X tells T that T should have renegotiated the lease terms when X bought Whiteacre.
- Did L have the right to sell Whiteacre to X over T’s objection? Explain.
- Was X required to repair the parking lot’s surface at T’s request? Explain, ignoring any issues of estoppel.
- What relief, if any, is T entitled to obtain for the permanent loss of parking space? Explain.