tenant before the new lease term begins. In addition, the landlord is in a far better position to offer testimony to rebut any defenses that the holdover tenant might raise. Moreover, particularly where residential leasing is concerned, the landlord is typically both more sophisticated about the eviction process and better able to bear the cost? involvedIn addition, the English rule best implements the actual (if unexpressed) intentions of the parties in most instances. The ordinary tenant and landlord pres’jme that the tenant will receive actual possession when the lease term begins, not merely the right to bring a lawsuit.§ 16.05 TENANT S DUTY TO OCCUPY[A] General Rule: No Duty to OccupyAlthough a tenant has the right to possession, the prevailing American rule is that the tenant has no duty to take possession unless an express lease covenant so requires. Suppose T, a corporation owning a chain of popular gourmet supermarkets, executes a lease for space in L’R aging shopping center, agreeing to pay $10,000 per month. Two months before the lease term begins, T discovers a much more desirable location in a new nearby shopping center owned by N, and executes a lease for space there. T is still obligated to pay rent to L. But, under the majority rule, T has no duty to occupy L's premises or operate a store there,50 even though T’s absence will impair the economic health of other stores in L’s center that need the customers a popular supermarket would attract. Courts typically reason that the landlord could have protected itself by negotiating an express covenant.[B] Exception: Implied Covenant to Operate Business
But there is an exception to the general rule. An implied covenant to operate a business will commonly be found where all or most of the rent is computed as a percentage of the tenant’s sales. Suppose that the lease in the gourmet supermarket hypothetical above obligates T to pay 8% of its gross sales as rent to L, without any fixed minimum rent. Presumably both T and L intended that T would operate its store on the site when they agreed to this clause. Most courts would honor this presumed intent by interpreting the iease to find an implied covenant to operate.51 Otherwise, a tenant could effectively prevent the landlord from receiving any rental incomc under the lease. However, no such covenant will be implied if a substantial minimum fixed rent is required in addition to percentage rent 52
50 C f- Slater v. Pearle Vuaoo Center, Inc, 546 A_2d 676 (Pa. 1BSS) (discussing general ruin).
51 See, iff.. College Block v. Atlantic Richfield., 254 Cal. Rptr. 179 (Ct. App. 1998).
5 2 See, e.g.. Piggly Wigggly Southern. Inc. v. Heard, 406 S.K.2d 478 (Ga. 1991) (no covernant where annual base rent was $29,053.60, with percentage rent on sales exceed $2,000,000 per year). But see Mercury Inv. Co. v. F.W. Wool worth Co., 7CC P.2d 523 (Okla. 1985).
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