Winn-Dixie Stores, Inc. v. Dolgencorp, Inc.

District Court of Appeal of Florida
964 So. 2d 261 (2007)

ELI5:

Rule of Law:

A restrictive covenant in a commercial lease that touches and concerns the land, is intended by the parties to run with the land, and is properly recorded in the public records is a real covenant running with the land, enforceable against a subsequent tenant who has constructive or implied actual notice of the restriction.

Facts:

In March 1996, Winn-Dixie Stores, Inc. entered into a lease as the anchor tenant for the Crest Haven Shopping Plaza.
The lease granted Winn-Dixie the exclusive right to operate a grocery store in the plaza, allowing other tenants to sell groceries only in an area of 500 square feet or less.
The lease explicitly stated that its provisions were covenants intended to 'run with the land.'
A short form of the lease, containing the grocery exclusive and a legal description of the plaza, was recorded in the public records of Palm Beach County on April 23, 1996.
In 1998, Dolgencorp, Inc., an experienced commercial tenant with thousands of stores, leased space in the same plaza to operate a Dollar General Store.
Winn-Dixie discovered that Dolgencorp was dedicating more than 500 square feet of its sales area to grocery items, in violation of the exclusive.
Winn-Dixie demanded that the landlord enforce the grocery exclusive, but the landlord failed to act.

Procedural Posture:

Winn-Dixie Stores, Inc. filed a complaint for injunctive relief and damages against Dolgencorp, Inc. and the landlord in the Florida circuit court (trial court).
Dolgencorp filed a motion for summary judgment.
The trial court granted summary judgment in favor of Dolgencorp, ruling that the grocery exclusive was not a real property covenant and was unenforceable against Dolgencorp.
Winn-Dixie (Appellant) appealed the trial court's final summary judgment to the District Court of Appeal of Florida, Fourth District.

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Issue:

Does a recorded grocery exclusive clause in an anchor tenant's commercial lease create an enforceable real property covenant running with the land against a subsequent tenant in the same shopping plaza, even if that subsequent tenant did not sign the original lease?

Opinions:

Majority - Gross, J.

Yes, a recorded grocery exclusive clause in an anchor tenant's commercial lease creates an enforceable real property covenant running with the land against a subsequent tenant. The court found that the grocery exclusive met the three requirements to be a covenant running with the land: (1) it 'touches and involves' the land by affecting the mode of enjoyment of the premises; (2) the lease explicitly stated the parties' intent for the covenant to run with the land; and (3) Dolgencorp had sufficient notice of the restriction. The court determined Dolgencorp had both implied actual notice, because as a sophisticated commercial tenant it should have known to inquire about such common restrictions for anchor tenants, and constructive notice, because the short form lease was recorded in the public records. The court held that for purposes of Florida's recording statute (§ 695.01(1)), a lessee is a 'purchaser' who is bound by recorded instruments. The court also held that Florida Statute § 542.335, governing restrictive covenants, applies to personal service non-compete agreements, not real property covenants, and therefore did not invalidate Winn-Dixie's exclusive.

Analysis:

This decision solidifies the enforceability of exclusive-use covenants common in commercial shopping center leases, confirming they are treated as real property rights rather than mere contractual promises. By classifying a lessee as a 'purchaser' under the recording statute, the court broadened the reach of constructive notice, reinforcing the importance for prospective commercial tenants to conduct thorough title searches for recorded restrictions. The ruling also clarifies the scope of Florida's non-compete statute, distinguishing real property covenants from personal service contracts, thereby protecting a fundamental tool used by anchor tenants to manage the commercial environment of a shopping center.

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