Recently, the Florida First District Court of Appeal ruled that a commercial real estate tenant has the right to continue its exclusivity provision in each of its lease options. In Amelia Island Restaurant II, Inc. v. Omni Amelia Island, LLC, the plaintiff operated and maintained a restaurant located at the Amelia Island Plantation in Nassau County, Florida. In 2012, the plaintiff and the property owner were unable to agree on the terms of a lease extension. The parties’ original lease agreement contained a provision prohibiting the landlord from allowing another full-service restaurant to operate in the same shopping center. The plaintiff argued that this exclusivity provision would remain in effect during a renewed lease term, while the landlord argued that it would not remain in effect.
The trial court ruled in favor of the landlord, holding that the exclusivity provision in the original lease would not carry over into the renewed lease agreement. In 2007, the Fourth District Court of Appeal decided Winn-Dixie Stores, Inc. v. Dolgencorp, 964 So.2d 261, 268, which held that Florida Statutes Section 543.335 required invalidation of an exclusivity provision in a lease agreement. Florida Statutes Section 542.335 establishes a rebuttable presumption that a covenant restricting competition for a period of six months is reasonable, and that a covenant restricting competition in excess of two years is unreasonable. If the restriction is determined to be overlong, overly broad, or unnecessary by the court, Setion 543.335 grants the court authority to modify the term to protect the affected party’s interests.
On appeal, the Court reversed the lower court’s ruling and found in favor of the plaintiff. In its opinion, the Court of Appeal first analyzed the provisions of the original lease agreement, which gave the plaintiff “an option to renew for a third five-year term in 2013, under certain conditions.” The conditions to renewal required the plaintiff to not be in default on any performance obligations under the lease, and to provide notice of its decision to renew according to the procedures provided in the lease. The Court of Appeal next distinguished the present case from Dolgencorp, finding that “where Dolgencorp involved an indefinite covenant running with the land, the Lease here effectively fixed the duration of the exclusivity provision with the [plaintiff] via the Lease’s initial five-year term and maximum of three potential renewal periods.”
Ultimately, the court held that Dolgencorp was inapposite and that Section 543.335 did not require invalidation of the exclusivity clause. The court went on to question the applicability of the statute to situations involving real property-related restricted covenants, stating in dicta that the provision appears to be more directed at non-compete clauses affecting personnel. Even assuming that the provision did apply, the court concluded that “there is no evidentiary support for the conclusion that the restrictive covenant is not ‘reasonable in time.’” In fact, witnesses at trial had testified that the length of the exclusivity period was necessary and appropriate due to the substantial investment in equipment that the company had made and that the restaurant “‘would absolutely not have signed’ the Lease without the exclusivity provision due ‘to the amount of investment in the building, in someone else’s property.’”
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