## Facts

- Robert Rowe, an attorney and businessman, owned commercial property in Sag Harbor, New York, and leased it to The Great Atlantic & Pacific Tea Company, Inc. (A&P).
- A 1964 lease provided a 10-year term at $14,000 annual base rent, renewal options, and no express restriction on assignment; it bound the parties’ “heirs and assigns.”
- In 1971, the parties renegotiated: Rowe agreed to expand the building by 6,313 square feet; base rent increased to $34,420 per year for a 15-year term with renewal options.
- The 1971 lease added a percentage-rent provision: Rowe would receive 1.5% of annual gross receipts above $2,294,666 (and below $5,000,000); A&P made no promise that sales would reach the threshold.
- The 1971 lease, like the 1964 lease, contained no express anti-assignment clause and only standard language binding “heirs and assigns.”
- A&P later closed the store due to poor performance and assigned the lease to Southland Corporation over Rowe’s objection.
- Rowe claimed he relied on A&P’s identity and sales volume to generate percentage rent and sought possession and damages based on an implied restriction on assignment.

## Issues

1. Whether a commercial lease that includes a percentage-rent clause, but is silent on assignability, contains an implied covenant restricting the tenant’s right to assign without the landlord’s consent.
2. Whether the circumstances of negotiation and the landlord’s alleged reliance on the original tenant’s drawing power justify implying a limitation on assignment.

## Decision

- The Court of Appeals reversed the Appellate Division and reinstated the trial court’s dismissal of Rowe’s complaint.
- The court held the lease contained no implied covenant restricting assignment.
- The percentage-rent clause did not convert the lease into an agreement requiring A&P’s personal performance or limit A&P’s power to assign.
- Because the lease had no express restriction, A&P retained the right to assign the lease.

## Legal Principles

- In New York, a lease is freely assignable unless the lease expressly restricts assignment; restraints on alienation are disfavored and must be clearly stated.
- An implied covenant will be recognized only when it is so clearly within the parties’ contemplation as to be necessary to carry out the contract’s purpose; courts do not add terms to reach a preferred result.
- A percentage-rent clause, standing alone, does not imply an anti-assignment covenant or a requirement that the named tenant continue operating the business.
- Where sophisticated parties negotiate a detailed commercial lease, the absence of an express restriction on assignment weighs strongly against implying one.

## Conclusion

The court held that a commercial tenant may assign its lease absent an express contractual restriction, and that a percentage-rent provision does not, by itself, justify implying a landlord-consent requirement or other limitation on assignment.


Rowe v. Great Atl. & Pac. Tea Co., 46 N.Y.2d 62, 385 N.E.2d 566 (N.Y. 1978)