Don't Allow Outdoor Market 'Stalls' to Violate Exclusive Use Rights
So-called "Farmers’ Markets" have been around for years, in many cases operating in the form of roadside stands, flea market exhibitors, or in shopping areas specifically dedicated to showcasing local goods. There's been a recent uptick in the popularity of farmers’ markets, as a trend towards buying locally sourced food and supporting small businesses is currently in vogue. While the trend is admirable, if the owner of the shopping center where you rent space allows a farmers’ market—or any business that works out of a "stall"—to set up shop near your store, it could violate the exclusive use provisions that you negotiated in your lease. The whole point of an exclusive use clause is to keep competitors away, so don't be fooled into thinking that stall-operated businesses are any different just because they don't operate like a traditional brick-and-mortar tenant.
Unfortunately for a Maryland grocery store tenant, its restrictive use rights didn't cover an area that was separate from its parking lot, but nonetheless competed for sales. In that case, the lease contained a restrictive-use covenant prohibiting the owner from leasing space to another grocery store or “food market.” The lease defined "food market" to include any vendor selling food items. The owner later leased space on the premises to a farmers’ market made up of stalls run by vendors selling various types of food. Two stalls were directly in the shopping center. Several other stalls were set up in an adjacent area that was owned by the owner but separated by a fence from the shopping center.
The tenant asked a district court for an injunction ordering the owner to remove all of the stalls. It also asked the court for lost profits damages. The district court ruled in favor of the tenant in part and the owner in part. The tenant and owner appealed.
A Maryland appeals court upheld the district court’s decision. It noted that the district court had determined that the operation of only the two stalls directly in the shopping center where the tenant operated its business violated the restrictive-use covenant. The owner’s allowance of the other stalls didn’t. The appeals court agreed. It determined that a permanent injunction was warranted with respect to the two stalls, but not the others.
If you're the type of tenant whose merchandise might also be sold by stall-operated businesses, try to negotiate provisions that would prohibit the owner from allowing stalls to operate in your parking lot or immediate area, and also any adjacent or nearby areas that the owner has control over [Redner’s Markets, Inc. v. Joppatowne G.P. Ltd. Partnership, December 2014].