Contracts, Penalty, Shopping Center Lease, Co-Tenancy Clause
The co-tenancy clause in this lease of a store in a shopping mall was not an unenforceable penalty under Civ. Code 1671 nor did the clause impose a forfeiture banned by Civ. Code 3275. The co-tenancy provision allowed the tenant to drastically reduce its rent if less than 60% of the shopping center’s space was leased to other tenants, was enforceable. The provision did not impose a penalty because it allowed the landlord a reasonable choice between alternative performances. It could accept the reduced rent from the existing tenant or attract additional tenants to achieve 60% occupancy by offering those prospective tenants more attractive terms or other inducements. For the same reason, the provision did not impose a forfeiture. Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332 is distinguishable because there the co-tenancy provision was linked to occupancy by a single company that went bankrupt, an event beyond the landlord’s control, and there was no alternative performance that the landlord could offer to escape the co-tenancy clause which allowed the tenant to walk from its lease scot-free.