![]() ![]() For landlords, because significant cost may be put into the space prior to the lease which is often unique to the tenant, a longer term helps to recapture some of the upfront costs. Retail leases often have terms between 3 to 7 years, and in some cases up to 10 years. If the landlord is constructing the tenant improvements and significant delays occur, does the tenant have the right to terminate the lease or to seek damages? The parties may determine a fixed date, or it may start on the day the tenant commences its retail operations in the space. Often it depends on whether or not the landlord or the tenant is responsible for finishing the tenant’s improvements, as that party has more direct control over when the premises are actually available for use. When the term of the lease actually starts and when the obligation to start paying rent begins should be tied in with the construction and completion of the tenant’s improvements. Term, Commencement Date, Rent Rate and Renewal Options What items are included and what items are specifically excluded?.Are you able to review the landlord’s records related to the CAM charges?.How are you being charged for the common areas? This is often called CAM, which stands for common area maintenance.What are your limitations on the use of these spaces?.What are the common areas associated with your space? Meaning, what other areas in the center/strip mall/shopping mall do you have the right to use and share with the other tenants? This often includes restrooms, parking, hallways, entrances, security, etc. What are the hours of operation of the neighboring businesses? Has your use of the space been accurately defined in the lease? Are there any specific limitations on your use? Do you want to negotiate an exclusivity provision into the lease? For example, do you want to make sure your business is the only one of its kind in the center/shopping area/strip mall? Double check the hours of operation that the landlord is requiring and make sure these align with your intended use. ![]() Will the landlord divulge how much time is remaining on their leases? Keep in mind, many stores rely on the foot traffic of their neighbors to generate additional business.Who are the other tenants are in the center/shopping area/strip mall?.Has the tenant ensured that it can remove its trade fixtures at the end of the lease?.Can the tenant leave them in place or does it need to remove everything and/or pay for demo work?.What happens to the improvements/build-out at the end of the lease?.Who is going to pay for the tenant build-out? Will the landlord give the tenant an allowance?.In addition to the tenant build-out, the tenant and landlord will need to determine what representations and warranties are going to be made regarding the space’s condition. the space) prior to commencement of the lease will largely determine the amount of tenant build-out (construction) required to get the space ready for the store. ![]() This article attempts to summarize some of the key business issues tenants should review when entering into and negotiating their retail leases. For these reasons, retail leases should be carefully and thoughtfully negotiated with the landlord. For tenants, the terms of their lease can affect the profit margins, growth potential, and overall success of their storefront and possibly even their brand. The result is a game of risk and cost shifting between the landlord and the tenant. Because of the up-front costs, retail leases often last between 3 to 7 years, and even up to 10 years. Due to the nature of a store’s operations, a tenant’s use of retail space can require unique tenant build-outs, special use considerations, ADA compliance, and the reliance on other neighboring tenants to generate business. Retail leasing presents a unique variety of business issues for tenants to consider. ![]()
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