Considerations When Changing Use of a Leased Commercial Space (SearsTown Center, Sears Gardens Mall at Palm Beach)

Considerations When Changing Use of a Leased Commercial Space (Sears/Town Center, Sears Gardens Mall at Palm Beach)

When parties enter into a long-term commercial lease, it is usually with the idea that both are making a worthwhile investment that will benefit both for years to come. In past decades, well-known retailers could enter into these agreements with shopping centers and area malls with certainty that their businesses would thrive. However, the internet has changed the sales game, and some big-box retailers have struggled to stay competitive, leading to store closures. When a business has to shut its doors, but the lease term is not over, the tenant is faced with a dilemma—either break the lease or come up with a new business for the space.  Legendary retailer Sears and The Gardens Center Mall are in a long-running dispute over this very issue. Here are some considerations when changing the use of a leased commercial space:

The Sears/Gardens Mall and Town Center Lease Disputes

In Palm Beach Gardens, Sears has been trying to sublease its second floor, located inside the Gardens Mall, to Dick’s Sporting Goods for years. However, the owners of the mall, Forbes/Cohen Florida Properties LP, have fought the change, pointing to its 1984 lease agreement with the anchor store. In 2014, the mall’s owner successfully blocked the sublease in a Palm Beach circuit court. However, in 2017, the lower court’s decision was reversed on appeal as the city’s restrictions on the sublease were held to be unconstitutional.

The fight does not appear to be over yet, however. In December of 2019, the Gardens Mall filed suit again, seeking to enforce terms from the 1984 lease regarding the store’s appearance and signage. Transform Operating Stores LLC, Sears’ now parent company, announced plans to move the Sears sign and place Dick’s signage in a specific location. The mall owners objected, arguing that the lease terms prohibit the use and movement of certain signs outside the property. The matter remains pending before a Florida circuit court.

This is not an isolated problem for Sears. In November of 2019, Town Center Mall sued another Sears’ property owner over a plan to put a non-retail business in a shuttered Sears store there. In that case, the suit involves a 1985 lease issue. The question is whether the owner can change the use to non-retail without committing a breach and thereby giving the mall owners the right to purchase the property first.

Considerations Regarding Changed Use

When developing your commercial lease, one of the best ways to prepare for the future is by working with experienced, local, Board-Certified, real estate counsel. Your attorney can help you create the right lease terms, identify potential issues, and ensure that your lease protects your interests. It’s not always possible to predict the future, but you can be prepared for what may come.

Contact Our Palm Beach Real Estate Attorneys Today

At Rabideau Klein, Guy Rabideau, Esq. and David E. Klein, Esq. are Florida Board-Certified Real Estate Attorneys with extensive experience in the Town of Palm Beach and its surrounding areas. We have the expertise and local knowledge you need to assist with all aspects of your commercial lease.  Contact Rabideau Klein today to discuss your real estate legal needs.

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