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Quite often, an anchor tenant will pay a lower rental rate per square foot than ancillary tenants that follow it in the lease up of a mall or shopping center.
An anchor tenant is generally perceived as a small tenant with minimal prestige, name and brand recognition. The hope is that an anchor tenant will attract customers to shop and attract other smaller tenants to lease space at a mall or shopping center.
The three most common forms of co-tenancy clauses are (i) opening date co-tenancy clauses; (ii) pre-occupancy co-tenancy clauses; and (iii) occupancy co-tenancy clauses.
As to shopping center or mall “centric” provisions, landlord advocates should include pro-landlord language in its lease that there shall be no change in the location, shape, and dimensions of the premises and that the visibility of tenant’s signs or storefront shall not be affected, without tenant’s prior written consent.
As to shopping center or mall “centric” provisions, a tenant advocate should include language in its lease stating that the landlord can place or maintain any kiosks, planters, trees, shrubs, stairs, elevators or other obstructions any place in front of the premises.
When it comes to agreeing to any pro-tenant representations and pro-tenant protections within shopping center or mall “centric” provisions, landlords should adopt the expression “less is more,” and allow the market and context of the deal to rule the day.
Most leases require a tenant to continuously operate its business while leasing its space, and in the event a tenant fails to adhere to any minimum hours of operation covenants contained in its lease, more often than not, the tenant will be subject to some type of monetary penalty as a consequence of doing so.
In the context of landlord imposed tenant operational requirements, a recapture clause allows the landlord to take back a tenant’s space, canceling all lease obligations in the event a tenant decides to “go dark” or ceases operating its business in accordance with the terms and conditions of the lease.
Unless the clause includes a landlord termination right, a well negotiated “go dark” clause to a retail tenant states that it may allow the tenant to essentially cease its business operations without being considered in default of its lease obligations, provided that the tenant continues to pay the rent due and owing under the lease.
A landlord should require in its lease that after the lease commencement date, tenant must continuously and uninterruptedly operate in the premises during tenant’s normal business hours (for the uses and in the manner permitted by the lease).
Given modern sound attenuation measures, landlords should not put language in the lease that limits the tenant’s right to play any live music, recorded music or other sounds played or broadcasted inside of the premises.
Most well drafted leases specify the manner in which the tenant must maintain its premises (including for retail leases, requiring the tenant to keep its store fully stocked and fully staffed by sales personnel).
In order to control the “image” of their property and the nature of the tenant mix at such property, it is imperative that landlords set standards within a tenant’s lease for the tenants to uphold.
Landlords prefer to have little control of the content of advertising or merchandise tenants use and sell within the premises.
Landlords should expressly state in the lease those uses which are prohibited in the premises (e.g., for the preparation, manufacture or mixing of anything that might emit any unreasonably objectionable odors or noises).
In a retail context, landlords attempt to control the manner of how a tenant must conduct its business within its space by including provisions within the lease which are pro-landlord in nature.
If applicable for a retail lease, it is in the landlord’s best interest to add the following language in the lease: “Tenant shall comply with all reasonable rules and regulations established by landlord with respect to delivery of merchandise to and from the premises and, to the extent within its control, the removal of wastes.”
It is in the tenant’s best interest to accept language within the lease which states that landlord makes no representation of any kind or nature as to tenant’s use and as such, tenant shall be responsible for any and all fines and penalties incurred (the payment of same being considered additional rent).
Landlord advocates should incorporate language within the lease expressing that, “In the event that any governmental authority shall declare by notice of violation or order that the premises are being used in violation of any law or regulation, tenant shall immediately discontinue such use, and failure to discontinue such use shall constitute a material default by tenant hereunder.”
To control the property’s image and tenant mix, landlord advocates should push for language within its lease reflecting that “Tenant covenants and agrees that (i) tenant’s use of the premises throughout the term will be consistent with the character and dignity of the building; (ii) the business conducted by tenant will be first-class quality; and (iii) sales employed by the tenant will be in conformity with the highest standards of practice in tenant’s industry.”
Landlord advocates should negotiate for language in the lease stating that all displays and exhibits placed or installed in or about premises, and any signs, lettering announcements or any other kinds of forms of inscriptions displayed in or about premises will be only such as meet with landlord’s approval.
Tenants should not be concerned that any consent language in the lease also has language that such consent is subject to a reasonableness standard.
Tenant advocates should attempt to incorporate the following language within the lease: “Notwithstanding anything to the contrary contained in the lease, landlord consents to (i) the use of video displays in the windows of tenant and (ii) tenant window signage and/or displays. Furthermore, landlord shall not unreasonably refuse to consent to any of tenant’s dignified signs, provided that they are in conformity with all relevant state and local codes.”
It is common in commercial leases that landlords require their tenants to maintain the property in a certain manner and not take certain actions without landlord’s prior approval.
Especially in retail leases, landlord advocates should include language that dictates how the tenant will maintain the area in front of its premises and dispose of its garbage, with language such as the following: “Tenant shall at all times keep the entire area in front of and alongside the Demised Premises clean and free of litter and rubbish. Tenant shall place any and all rubbish in areas designated by Landlord from time to time. Unless otherwise agreed to by Landlord in writing, Tenant further agrees that they shall make arrangements for daily pickups five (5) times weekly of rubbish, refuse and garbage. The Tenant also agrees that it will be responsible for the removal of ice and snow in front of the Demised Premises to one (1) foot in front of the sidewalk into the street. Furthermore, Tenant shall at all times keep the portions of the interior of the Demised Premises visible from the outside neat, tidy and orderly.”
Tenant advocates should push for language in the lease that tenant shall promptly comply with any reasonable request from landlord for a change in a particular method of operation if other tenants in the building complain about such method of operation.
Landlord advocates should require that the installation of any blinds or other window coverings, signs or banners in a tenant’s space shall be subject to landlord’s written approval.
Generally, tenant advocates should propose the following language: “Subject to all applicable laws, rules and regulations of any governmental or quasi-governmental entity, it shall be tenant’s responsibility to install the signage for the demised premises. Such installation shall be done at tenant’s sole cost and expense. The sign by tenant must be approved by landlord and the contractor selected by tenant to install the sign must be approved by landlord, at landlord’s sole discretion.”
The following are tenant uses a landlord will commonly exclude in its lease: (i) to conduct or permit any fire, auction, going-out-of-business or bankruptcy sale; (ii) to engage in unethical or disreputable method of business operations; (iii) to sell or display for sale or display any pornographic or obscene material; and (iv) an unemployment, counseling or other similar social services office.
Generally speaking, landlords are not concerned with the nature of the tenant mix in its mall or shopping center, and therefore will lease space to businesses with the same or similar use (e.g., multiple sporting goods stores within the same mall or shopping center).