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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."

A proponent of banning restrictive covenants, Metropolitan Planning Council executive vice president Peter Skosey also expects a legal challenge. "Will it be challenged? Most likely," Skosey says. "Will it go to court? Most likely. But I think in the long run, we'll prevail."

Chicagoland Chamber of Commerce president and chief executive officer Jerry Roper notes the law violates "the sacred nature of property rights" while attempting to address community complaints. Roper, whose group represents 2,600 members, urged a joint panel of the council's zoning committee and economic, capital and technology committee to consider addressing the restrictive covenants on a case-by-case basis, an offer that was rejected. Illinois Retail Merchants Association chief executive officer David Vite adds the ordinance will be a hardship on his members, discouraging them from making investments in the city, which typically range from $5 million for a single store.

The ordinance grandfathers restrictive use covenants in place before May 11. "That doesn't mean, in my legal opinion, someone couldn't challenge those restrictive covenants on an individual basis," says 1st Ward Alderman Manuel Flores, an attorney.

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GlobeSt.com UPDATE: Legal Battle Predicted for Lease Bans

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