Protect Benefits of Your Retail Location

September 21, 2017
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The advantages of leasing in a strip mall or shopping center, rather than a stand-alone building, are numerous: good proprietary signage, a desirable tenant synergy, convenient parking, and visibility. And savvy tenants make sure that these benefits—which may be a large part of the reason they chose the particular strip mall or shopping center—are provided for in the lease. However, those elements can change with a redevelopment of the property, leaving you with space that has become drastically less attractive for you. So, how can you ensure that the features that drew you to the center in the first place don’t disappear? You can negotiate provisions in your lease that protect them—and possibly your bottom line—from the owner’s potential redevelopment plan.

A major item to watch out for is that you don’t lose coveted signage. A favorable signage provision in your lease, especially one with an exclusivity right, is crucial. An exclusivity right could give you the most prominent position on a multi-tenant sign, or the only panel for a tenant of your type—for example, a restaurant. But the owner can’t simply grant whatever signage rights you ask for in your lease, because they are subject to applicable law and city approvals.

The signage rights an owner can give to a retail tenant are often dictated by a signage program established by the local government that includes requirements for and limitations on logo designs, color schemes, square footage, backlighting, illumination, quality of materials, and other details. The signage program is contained in the entitlement package from your owner when you agree to your lease, but can change along with local laws.

When a government action requires passage of a law that also adversely affects your signage program, your owner cannot be held liable for it. But when an owner voluntarily redevelops the property, the government may condition its approval of some or all of the redevelopment on the imposition of a new signage program that’s incompatible with the existing one—and your particular signage. Even though the new signage program and the new restrictions on your signage are required by applicable law, they weren’t triggered by the local government—they were triggered by the owner’s voluntary redevelopment.

To protect your proprietary signage rights, negotiate a lease provision that: (1) states exactly what signage rights you get; (2) stipulates that you recognize that those rights are subject to existing law; and (3) prohibits the owner from taking any voluntary action that will cause a reduction in the scope, quality, or prominence of the signage because of consequential governmental impositions.

You can do this by attaching to the lease a depiction of the exact signage you have negotiated and its location. For multi-tenant signage, specify the linear feet, panel size, and position you’re supposed to get. And specify as much as you can in the lease with exhibits. Exhibits are very valuable. Have the owner’s signage program attached as a lease exhibit to avoid confusion. Put a limitation on the owner voluntarily taking action that would result in a reduction in your entitled signage.

For more protections to negotiate with your landlord, and a model lease clause that will protect your lease rights at a beneficial retail location, see “Negotiate Provisions That Take Advantage of Center’s Redevelopment Plan,” available to subscribers here