ICSC Legal Database - Cases

Monday, February 22, 1999 05:01 PM

Case Index:

00102

Citation:

1010 Potomac Assoc. v. Grocery Manufacturers, 485 A.2d 199 (D.C. App. 1984).

Issue:

Whether, where a lease required the lessor's consent, not to be unreasonably withheld, the lessor may withhold

consent for purely economic gain.

Facts:

A national trade association leased for an initial term of ten years with a renewal term of an additional five years,

12,000 square feet of the eighth floor of a building with options to take the remaining space on that floor

amounting to 4,000 square fee t in two segments of 2,000 square feet each at the end of the fourth and seventh

years. The

landlord gave the lessee trade association substantial concessions including a cash credit against the rent, so

that the landlord could present prospective lenders with a lease at a seemingly high rate. The lease provided

that if the tenant was nor in default, the option for the additional space could be exercised. The lease also

contained a

provision allowing the lessee to sublet with the consent of the landlord w hich was not to be unreasonably

withheld. The option was exercised in timely manner and after some period of time, lessee was able to sublet

the additional space to a law firm. Landlord was asked to consent to the sublease for the option space for the

bal ance of the initial term of the lease, but was willing to consent to the sublease only if the tenant would split

the differential in rent due under the prime lease and the higher rent under the sublease. The landlord claimed

that the lessee's option was l imited to the lessee itself expanding into the space rather than subletting the

additional space. Lessee then commenced this action seeking a declaratory judgment, specific performance

and preliminary and permanent injunctive relief. The sublessee was gra nted leave to intervene as a party

plaintiff. The Court entered judgment in favor of the plaintiff and enjoined the landlord from withholding consent to

the sublease and defendants appealed.

Holding:

Affirmed. The Court concluded that nothing in the lease prohibited the lessee from exercising the option and

subleasing the entire balance of the floor space at a profit; that landlord's refusal to agree to the sublease was

based solely on economic consid erations; that it was unreasonable for the landlord to withhold consent simply

to extract an economic concession and that, therefore, the landlord acted unreasonably in refusing to consent

to the sublease. The Court rejected the argument of the landlord t hat the lease did not allow the tenant to

exercise its combined option to subleasing rights so as to compete with the landlord by utilizing all the option

space to profit from a sublease. This was a case of first impression in the District of Columbia on the question of

whether a

landlord'd consent to a sublease may reasonably be withheld for economic advantage.

Publication:

Legal Update

Date:

Winter 1984

Classification 1:

Landlord and Tenant

Classification 2:

Classification 3:

00102 - Legal Update - Winter 1984