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GlobeSt.com UPDATE: Legal Battle Predicted for Lease Bans

CHICAGO-Banning restrictive use covenants in leases involving grocers and pharmacies occupying 7,500 sf or more not only appears to be a slam-dunk in the city council, but a near certainty to be challenged in court.

By Mark Ruda | Updated on August 12, 2005

CHICAGO-Both sides in the debate over restrictive use lease covenants could agree on at least one point—the city’s ordinance will be challenged in court after passage. They differed, though, on the chances of the law withstanding legal challenges.

The city council could move as early as next month to ban language in retail leases that would prevent competing grocers or pharmacies from moving into vacated space. The law could cover deals involving 7,500-sf space blocks, and allow restrictive covenants for up to three years if the tenant relocated within a half mile of the vacated site. Aldermen say communities have suffered as a result of large grocery chains vacating stores and preventing competitors from opening shop.

“This ordinance is a slam-dunk in the courthouse,” says 42nd Ward Alderman Burton Natarus, predicting the law will hold up. “The courts don’t look very kindly at restrictive covenants at all. They strike them down.”

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