## Facts

- A shopping center owner leased space to Kroger for a 20-year term with renewal options and granted Kroger an exclusive-use covenant barring competing grocery uses in the center and on nearby owner-controlled property for the lease term.
- Kroger operated a supermarket on the premises until 1982, then assigned the lease to Pay Less in 1983.
- Pay Less did not intend to operate a grocery store at the center; it acquired the lease to exclude competitors of its nearby stores.
- In 1984, Pay Less subleased the premises to an appliance retailer, and no grocery store operated on the leased site after 1982.
- Tippecanoe Associates II, LLC later acquired the tenant’s leasehold interest and sought to enforce the covenant.
- Kimco purchased the shopping center subject to the lease and sublease and sought to lease vacant space to Schnucks, a grocery chain.
- Kimco filed an action for declaratory judgment that the restrictive covenant was unenforceable.

## Issues

1. Whether a shopping-center covenant prohibiting leasing to a tenant’s competitors remains enforceable by the tenant’s assignee after the tenant voluntarily stops using the premises for the protected grocery use and instead uses the covenant solely to block competition for off-site stores.

## Decision

- The Indiana Supreme Court held that shopping-center exclusive-use covenants are generally enforceable.
- The Court held that when the tenant or successor voluntarily relinquishes the original protected use of the leased premises, the anticompetitive covenant becomes severed from occupancy and is not enforceable to restrict competition for locations outside the center.
- Because the premises had not been used as a grocery store for decades and the covenant was invoked to protect off-site stores, Tippecanoe could not enforce the covenant to prevent Kimco from leasing to Schnucks.
- The Court reversed the contrary enforceability ruling of the intermediate appellate court and reinstated judgment for Kimco on enforceability.

## Legal Principles

- Exclusive-use or noncompetition covenants in shopping-center leases are generally valid and enforceable as a matter of contract and property law.
- An anticompetitive lease covenant tied to a tenant’s on-site business purpose is enforceable only while the tenant (or successor) maintains the relevant protected use on the leased premises.
- When the beneficiary voluntarily abandons the protected on-site use and seeks to apply the covenant solely to shield separate off-site operations from competition, enforcement is barred because the covenant is severed from occupancy.
- A covenant described as “running with the land” may still be construed in light of its purpose and the conditions under which continued enforcement is justified.

## Conclusion

The court upheld the general validity of shopping-center exclusive-use covenants but limited their enforcement when the tenant has abandoned the protected on-site use and attempts to wield the covenant purely as a restraint to protect off-site business interests.


Tippecanoe Assocs. II, LLC v. Kimco Lafayette 671, Inc., 829 N.E.2d 512 (Ind. 2005)