We've Exclusive rights to sell Coffee in a Strip Center; now a Tenant also sells Coffee; how would you do?

We've a Lease with the Leasor with Exclusive Rights to sell Coffee, among other Items, in a Strip Center; now a new Comer next door (with Common Landlord/ Leasor) also adds Coffee to sell on their Menu; we've directly informed them, yet they insist to have Coffee on their Menu; we've also informed the Leasor; still, we continue to see Coffee on their Menu; how would you do if you were the Leasee or the Leasor?
In Property Management - Asked by Jient L. - Dec 19, 2015
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Answer(s)

Kristopher P.
Broker/Agent
Cutchogue, NY

I have dealt with this and it was a mess. We had existing tenant (deli) with coffee exclusive and a national wanting to come to same center and pay 3x the rent. Tenant with exclusive engaged an attorney and fought to enforce their exclusive. Eventually the national paid them about 18months of rent to have them waive their exclusive. We are now 2 years later and the deli is just about out of business. Hope this helps

Dec 20, 2015
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Damon D.
Broker/Agent
Bala Cynwyd, PA

What is the exact language in the lease? There are exclusive rights and there are exclusive rights. Without knowing the exact language, as spelled out in your lease, it's impossible for anyone on here to provide any real insight. For example, does your exclusive say you have the exclusive to sell coffee as a primary use (eg, if you area coffee shop), which would allow incidental sales of coffee (say 15-20% of total sales as an example). Also, the way you stated your question, it's difficult to interpret if "next door with common landlord" means in the same strip center and the space next to you or if it means in the property next to the strip center you are in. This will make a difference also. Too many open questions.

Dec 20, 2015
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Patricia N.
Tenant
Los Angeles, CA

Your lease is with the lessor and you have little if any direct remedy for any violations of the exclusive with the actual violator. Typically, the violation of the exclusive would put the Lessor in default and you would have remedies per the lease. Usually that includes the right to terminate the lease if the default is not cured. That may not be a very useful remedy if the store is profitable even with sales encroachment. If the store is on the fence, it may provide an exit strategy.
As Damon D. indicated, there is a wide variation in exclusive rights. Having spent a fair amount of my career working for corporate coffee chains, rarely would a competent lessor give a complete exclusive on selling coffee in all forms and manner on their property. It typically has "Primary Use" or uses terms like "Gourmet" or for "take-out" or care-outs for "Full Service" restaurant or ancillary sales.
Next time, flesh out the exclusive to provide appropriate and realistic framing of the exclusive and additional remedies such as half rent or specific dollar compensation during the period of violation of the exclusive
Please note that these are not legal opinions, only commentary bases on industry experience.

Dec 21, 2015
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