Failure to Operate Parking Lot Continuously Isn't Lease Violation

Facts: The owner leased a parking lot to a tenant, and both agreed that the tenant would use the lot only for off-airport parking and related uses. Subsequently, the tenant opened up a second lot nearby and focused primarily on its operations. Eventually, the tenant moved all of its business to the second lot, but continued to pay the owner for the vacant premises until the lease ended.

The owner sued the tenant, arguing that the tenant violated the lease and devalued the lot by not continuously running a parking lot on the premises.

Decision: A Missouri court ruled in favor of the tenant.

Reasoning: The court determined that the lease did not contain an “implied covenant of continuous use—that is, a legal expectation that the tenant would continuously conduct business on the premises, as agreed upon in the lease.

Courts usually find that a lease contains an implied covenant of continuous use if: 1) the business functions as an anchor store; 2) the rent is tied to the store's sales; and 3) the lease allows the tenant to transfer his rights to another tenant without restriction. None of these factors applied to the lease in this case.

Editor's Note: Courts also find that a lease implies continuous use if leaving the space vacant would mean that any special zoning allowing a tenant to do business even after the business has been found to be illegal, would not be in effect.

• Adbar Company, L.C. v. PCAA Missouri, LLC, January 2008