JJD-HOV Elk Grove, LLC v. Jo-Ann Stores, LLC | Case Summary By: Chase A. Stone

In JJD-HOV Elk Grove, LLC v. Jo-Ann Stores, LLC, the California Supreme Court recently upheld the enforceability of a cotenancy provision in a commercial lease which permitted the commercial tenant to pay reduced rent if specific co-tenancy requirements in the shopping center were not met.  The Court concluded that the co-tenancy provision did not constitute an unenforceable penalty under California law, but rather, reflects the landlord’s discretion to offer greater or reduced services to its commercial tenants.  This decision underscores the importance of cotenancy provisions and allocating risks between landlords and tenants in commercial leases.  Recent Chapter 11 petitions filed by major retailers may raise additional issues with respect to the enforceability of cotenancy provisions, particularly in relation to the assumption and assignment of prepetition leases which are governed by state law yet have become subject to Bankruptcy Court orders pursuant to 11 U.S.C. § 365.

Case summary as written by Chase A. Stone.

Find the full case summary at JJD-HOV Elk Grove, LLC v. Jo-Ann Stores, LLC - California Lawyers Association