Unreasonable Rejection of Thrift Store Sublease Costs Shopping Center Owner $388K

What Happened: A shopping center lease allowed a drug store tenant to assign or sublet the space “with Landlord’s consent, which consent shall not be unreasonably withheld.” The tenant subleased the space to Goodwill Silicon Valley (SV), but the landlord refused to consent. The jury ruled that the landlord violated the clause and awarded the tenant damages of $338,744.

Ruling: The California appeals court upheld the verdict.

Reasoning: The landlord’s rejection of the sublease wasn’t based on commercially reasonable grounds but its personal distaste for renting to a thrift store, the court reasoned, noting that:

• Goodwill SV is a financially secure organization;
• Its proposed use was workable and permitted by the Master Lease;
• It operates a successful store in a nearby area with shared demographic characteristics nearby; and
• Many Goodwill stores in the Bay Area are co-tenants in shopping centers that feature major national tenants like the ones in the landlord’s center.

• Longs Drug Stores Cal. v. Ds, 2022 Cal. App. Unpub. LEXIS 529, 2022 WL 260641