[WSBARP] Covenant Not to Compete (?) and Sale of Building

[Eric Nelsen]

I don't have a draft covenant but I know these are standard clauses in a lot of mall leases--typically each tenant (and especially an anchor tenant) wants to make sure a competitor doesn't move in. I think this would be structured as a covenant between the two parcels, and it's enforceable. Requires the usual bells and whistles for a real covenant--full legal descriptions, notary acknowledgments, etc.  It's usually best to have a separate clause expressly allowing injunction as a remedy without necessity of posting bond.

I agree that it probably is better characterized as a use restriction, rather than a noncompete, though obviously it has a strong relationship to a noncompete agreement.

Sample from a litigated case in Illinois, upholding reasonableness of a similar restriction:

Landlord covenants and agrees, from and after the date hereof and so long as this lease shall be in effect, not to lease, rent, occupy, or suffer or permit to be occupied, any part of the Shopping Center premises or any other premises owned or controlled, directly or indirectly, either by Landlord, its successors, heirs, or assigns, or Landlord's principal owners, stockholders, directors, or officers or their assignees (hereinafter called Owners), which are within one mile of the Shopping Center premises for the purpose of conducting therein or for use as, a food store or a food department or for the storage or sale for off-premises consumption of groceries, meats produce, dairy products, or bakery products, or any of them; and further, that if Landlord or owners own any land, or hereinafter during the term of this lease Landlord or Owners acquire any land within such distance of the Shopping Center, neither will convey the same without imposing thereon a restriction to secure compliance with the terms of this lease. - See more at: http://www.ccim.com/cire-magazine/articles/restrictive-covenants-commercial-leases#sthash.BkPA6XJj.dpuf

National Super Markets, Inc., v. Magna Trust Co., 212 Ill. App. 3d 358; 570 N.E. 2d 1191 [1991].
http://www.ccim.com/cire-magazine/articles/restrictive-covenants-commercial-leases

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1320 University St
Seattle WA  98101-2837
phone 206-625-0092
fax 206-625-9040



From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Paul Neumiller
Sent: Thursday, June 25, 2015 2:49 PM
To: wsbarp at lists.wsbarppt.com
Subject: [WSBARP] Covenant Not to Compete (?) and Sale of Building

Listmates:  A issue has come up that I don't have time to research (parties want to close escrow next week, of course) and I was hoping someone might be able to give me guidance.  Client owns two adjacent commercial buildings and is selling one.  Client has a toy business in the building that Client is retaining.  Parties have agreed that for as long as there is a continuous operating toy business in the retained building that buyer will allow a toy business in the building that buyer is purchasing.  Is this legally enforceable?  Maybe this shouldn't be called a covenant not to compete but rather a private parties' use restriction?  Sample provisions to insert?  Thanks
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbarp/attachments/20150625/6bb26bc3/attachment.html>