Facts: A landlord of a multi-tenant shopping center enters into a lease agreement containing a rent provision reducing the tenant’s rent when the occupancy level of the shopping center falls below a set threshold. The occupancy level drops below the threshold for the period required and the tenant pays the reduced rent amount. The landlord demands the full rent set by the lease agreement, which the tenant rejects.
Claim: The landlord claims the tenant owes the full rent as the rent reduction provision is an unenforceable penalty since the provision is triggered by the actions of others, leaving the landlord with no alternative action to avoid the penalty.
Counterclaim: The tenant claims the rent provision setting rents based on occupancy is enforceable since the landlord’s alternatives are to provide a higher level of service or lower rents to retain and attract tenants sufficient to maintain occupancy levels rather than triggering the reduced rent provision.
Holding: The California Supreme Court holds the tenant properly paid the reduced rent as a rent provision setting reduced rent based on occupancy within a multi-tenant retail property is enforceable since the landlord has the alternative to provide a higher level of service or lower rents to attract or retain tenants. [JJD-HOV Elk Grove, LLC v. Jo-Ann Stores, LLC (2024) 17 C5th 256]
JJD-HOV Elk Grove, LLC v. Jo-Ann Stores, LLC
Editor’s note — Read previous writings on the lower court opinion of this case here.
Related RCD:
Is a rent abatement provision unreasonable when no money losses occur for the tenant?
Related Reading:
Real Estate Property Management Chapter 42: Commercial lease agreements
The widening level of vacant commercial space available in SoCal — Q1 2025
