Shopping center leases are unlike standard commercial leases. Like a commercial lease, rent will be tied to the number of square feet. However, shopping center tenants may also be required to pay a certain percentage of gross sales. In addition tenants may be required to contribute to the maintenance of the common areas of the shopping center.
Effective shopping center leases should contain numerous provisions which the landlord and tenant agree about. These include:
- Permitted Uses: Hours of operation, products sold, displaying of merchandise and signs
- Term: Number of years, lease start and stop dates
- Common Expenses: Maintenance and operation of common areas
- Utilities: Electricity, water, sewer, heating, and air conditioning
- Care of Premises: Lighting, show windows, parking, and exterior surfaces
Landlords of shopping centers may be in violation of anti-trust laws if they have clauses that restrict the use of the property, and give certain tenants a competitive advantage. Examples include:
- Permitting department stores to exclude discount stores
- Giving department stores the right to approve all new tenants
- Restricting the price, quality, and types or brands of merchandise that may be sold
While there are many restrictions to shopping center leases that are illegal, landlords are permitted to insert certain restrictions. These include:
- Landlord’s right to maintain a balanced and diversified group of stores, merchandise and services in a shopping center
- Right to prohibit non-retail businesses
- Right to prevent objectionable tenants from leasing – these include pornography shops, massage parlors, and auto body shops
- Right to choose the location of retail stores
When deciding if a restriction is illegal or not, the court will consider the intent of the parties, the effect of the restriction on public policy, and among many other things, the importance of the restriction.
Shopping center leases are highly complex and can have a significant impact on the success of your business. A real estate attorney specializing in commercial real estate can review, draft, and modify your lease.