Retail Real Estate Litigation & Emerging Issues
Retail's disputes have shifted from the pandemic-era survival questions to structural ones — co-tenancy triggers, percentage-rent audits, and assessment fights that recur every cycle regardless of how the leasing market is doing.
What's driving disputes right now
Grounded in current market and legal reporting, not speculation — each item links to its source.
Co-Tenancy Clause Triggers
After an Elk Grove, CA shopping center lost anchor tenants Sports Chalet and Toys "R" Us, Jo-Ann Stores invoked its co-tenancy clause to cut its rent by more than 70%. The landlord sued arguing no real harm occurred, but California's Supreme Court unanimously upheld the clause as enforceable between sophisticated, counsel-advised parties.
Why it matters: A state high court has now endorsed treating co-tenancy rent-reduction clauses as enforceable as written, regardless of whether the landlord disputes actual harm — landlords should price and manage anchor-vacancy risk accordingly, not count on courts to narrow these clauses.
Percentage-Rent Audit Disputes
Landlords auditing tenant-reported gross sales for percentage-rent leases face growing complexity as buy-online-pickup-in-store and omnichannel fulfillment blur what counts as "sales at the premises." Retail real estate attorneys now flag this as a leading source of audit disputes, since most existing leases' gross-sales definitions predate omnichannel fulfillment entirely.
Why it matters: Landlords with older percentage-rent leases are likely under-capturing omnichannel revenue attributable to their premises — a real negotiation and drafting risk even before it produces a headline lawsuit.
Experiential Retail Build-Out Disputes
A developer sued the City of Glendale, Colorado in March 2025 over a $150 million entertainment redevelopment meant to backfill retail space with a nine-screen cinema, restaurants, and shops, alleging a ground-lease dispute stalled construction — only a parking garage had been completed as of mid-2026.
Why it matters: Converting traditional retail boxes to entertainment uses can generate construction and permitted-use litigation risk capable of delaying a project by 18+ months, even on a project with strong municipal backing.
Dark-Store Valuation Fights
Wisconsin's Supreme Court unanimously rejected Lowe's argument that its operating, profitable store should be valued like a vacant big-box comparable — holding an operating store's highest-and-best-use differs from a dark one. Municipal advocates called it the effective end of the "dark stores" argument there, but the fight remains active elsewhere: Michigan legislators were still pushing bills to statutorily bar dark-store comparables as of late 2024, citing over $2 billion in lost local tax revenue from the loophole.
Why it matters: This remains a live, multi-state battleground — expect either continued dark-store appeals where it's unresolved, or new statutory bars following Wisconsin's lead, either of which affects comparable-sales strategy in tax appeals.
Bankruptcy Lease-Termination Leverage
In Saks Global's Chapter 11, mall REIT Simon Property Group moved to terminate two leases over more than $7 million in unpaid rent; the parties settled by May 2026 with Saks keeping both locations in exchange for rent concessions, shorter lease terms, and added landlord protections against a future bankruptcy.
Why it matters: A major mall REIT actively used lease-termination leverage mid-bankruptcy to reprice underperforming leases rather than simply losing the tenant — a template other landlords may follow with distressed anchor tenants.
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