While soft markets come and go, the current struggles of office building owners go beyond normal economic cycles. Fundamental changes are taking place, including the proliferation of hybrid work arrangements where employees spend only a couple of days per week working at the office. With fewer employees in the office at the same time, businesses are cutting back on the amount of office space they lease. Of course, this takes a bite out of landlords’ leasing revenues. 

The good news is that it also creates new strategic opportunities for landlords, provided that they offer the right amenities. High on the short list of game-changing amenities is common workspace and conference facilities. One leading model is to set aside an aesthetically pleasing, well-equipped floor, space, area, or facility within the building as a conference center that’s available to all tenants to reserve for meetings and other business functions as needed. 

We’ll take a look at the concept, explain how to create a leasing strategy to implement it, and give you a Model Lease Clause incorporating 16 legal protections landlords that offer conference center amenities need. 

Conference Centers Help Attract & Retain Tenants

Studies show that a vibrant conference center is a major attraction for tenants, especially in key industry sectors like technology, information, media, and arts and entertainment. For one thing, it fills a distinct need created by hybrid work. “The conference room is often the first thing office tenants cut when they downsize their space,” notes a Los Angeles leasing attorney. These spaces prove critical later when the downsizing company needs to gather employees together in a physical space. 

The other thing modern tenants like about a really nice conference center is how it helps them attract and retain quality personnel. The millennials these companies are targeting want to spend their work time in an aesthetically pleasing, vibrant, open, and collaborative space rather than a drab and traditional office building. A sizzling conference center may be the perfect solution. That’s why so many landlords say that tenants are willing to pay extra rent, from $2 to $6 more per square foot, according to an NAIOP Research Foundation study, to lease in buildings that offer them.   

How to Create a Legally Sound Arrangement

The conference center is part of the common areas that the landlord establishes and maintains for the enjoyment of all tenants. While most prevalent in office buildings, the amenity may also work in other commercial real estate settings leased to multiple tenants, including shopping centers. There are two basic business models landlords can use to operate a conference center at their property:  

• Lease or license the space to a third-party services vendor that pays all of the operating expenses and retains the revenue from the business, other than the additional rent you collect from tenants; or
• Operate it yourself using your own personnel the way you do other building common areas.  

Landlords also need to establish clear rules for tenant use of the conference center. These provisions may be either incorporated into the main lease or as a separate attachment. In either case, they should include 16 protections.  

1. Tenant Duty to Obey Conference Center Rules 

Make it clear that failure to comply with all terms set out in the clause is grounds for revoking the tenant’s rights to use the center. “The prospect of losing conference center use privileges is a powerful incentive,” advises a Florida leasing attorney [Clause, Preamble]. 

2. No Center Use for Tenant in Default

Specify that the tenant must fully comply with all of its rent and other obligations under the lease and can be barred from using the center if it defaults. The tenant may insist on narrowing the scope of this clause by insert the word “material” before “default” [Clause, Sec. 1]. 

3. Tenant Duty to Use Conference Center Legally

Require the tenant to ensure that its use of the center complies with:

• Federal, state, county, and municipal laws, regulations, and ordinances; 
• Directives, orders, or citations by any public officer in connection with its use of the center, including to abate a nuisance; and 
• All insurance requirements related to its use of the center.

In addition, say the tenant must immediately notify you in writing of any notice of any directive, order, citation, or any legal or insurance violation it receives [Clause, Sec. 2].

4. Tenant Duty to Not Commit Violations

The Yin to the duty-to-comply Yang is language barring the tenant from using or permitting the use of the center for any purpose or activity that violates any law, the certificate of occupancy, an insurance policy covering, or an encumbrance upon the center or the building. It should also provide for immediate discontinuance of such use while also banning any use of the center by the tenant that interferes with the use and enjoyment of the building by the landlord or other tenants [Clause, Sec. 3].

5. Rules for Reservation of Conference Center Space

Next, get into the mechanics of the tenant’s actual use of the center starting with the protocols and procedures the tenant must follow to reserve space at the center for an event. Specifically, the clause should address: 

• How many days in advance the tenant must make the reservation;
• The information the tenant must list on the reservation request, including a description of the proposed event, its date, time, and expected head count, and any special equipment or space needs; and
• The maximum amount of time for which the center may be reserved for an event [Clause, Sec. 5].

6. Rules for Confirming & Cancelling Reservations

Rules and deadlines for confirmations and cancellations of reservations are also important, especially at buildings where there’s a high tenant demand for center space. Treat a tenant’s failure to provide timely confirmation and follow confirmation instructions as cancellation of the reservation. To the extent it hurts other tenants who’d like to use the space, there should also be appropriate penalties, including cancellation charges, for tenants who cancel events at the last minute [Clause, Sec. 6]. 

7. Rules for Accommodating Tenant Requests for Reconfiguring Conference Center 

While the conference center’s design should be as flexible as possible, tenants may ask you to reconfigure the space for their particular event. The lease clause should specifically address whether you’re willing to make changes to the “default” configuration and, if so, under what conditions and timelines [Clause, Sec. 7]. 

8. Rules for Accommodating Tenant Requests for Special Equipment

Tenants may also have special equipment needs for their events. The lease clause should say that tenants are expected to take the space on an “as-is” basis with “plug-and-play” equipment but also provide for any additional equipment furnishing or servicing arrangements that you’re willing to make. In all cases, require tenants to inspect the equipment immediately before the event to verify that the equipment is in working order. State that you’re not responsible if the equipment doesn’t work right during the event. Also require tenants to leave the equipment in good working order and in a neat condition after the event ends [Clause, Sec. 8].

9. Rules for Conference Center Decorations

Like many landlords, you may want to ban tenants from hanging decorations from the center’s ceiling or light fixtures. Another potential problem area is nailing or using sticky tape that can scar or damage walls and doors to display decorations, signs or posters. Glitter, confetti, and rice can also leave a major mess [Clause, Sec. 9]. 

10. Rules for Catering of Conference Center Events

Food and drink are an essential part of what give conference center events their vibrance. So, be prepared to allow tenants to cater their events while establishing appropriate limitations, including requiring tenants to provide you certification before the event that their catering vendors have minimum liability insurance coverage. How much? Attorneys suggest at least $1 million per occurrence for each of the following: 

• Bodily injury;
• Property damage; and 
• Fire.

Also establish rules for cleanup and disposal of food items left in the center overnight after the event is over [Clause, Sec. 10].

11. Rules for Serving Alcohol at Conference Center Events

You’re also going to need clear rules for serving of alcoholic beverages during conference center events to guard against liability risks. The lease should require tenants to use only properly licensed alcohol serving vendors with Liquor Liability insurance coverage of at least $1 million. Our Model Lease Clause also addresses the risk of liability that a tenant/host may incur if a guest leaves drunk and gets into a car accident causing injuries to third parties, including the requirement that tenants that serve alcohol at center events have at least $3 million in “dram shop liability” coverage [Clause, Sec. 11].

12. Rules of Conduct for Guests of Conference Center Events

Hold the tenant responsible for ensuring that its guests don’t engage in any behavior that’s illegal, unsafe, disorderly, or that unreasonably interferes with the management of the building and its use and enjoyment by other tenants. Such rules of conduct may include bans on smoking, illegal drug use, profanity, lewdness, harassment, violence, and noisiness. Guests should also be required to comply with all security, parking, fire, sanitation, and other building protocols while on the premises [Clause, Sec. 12].

13. Rules for Cleaning Conference Center After Events

Require the tenant to restore the center to its original configuration and condition after the event. While landlords are generally responsible for cleaning the space after an event, the tenant should be required to remove all outside equipment, trash, materials, etc. Reserve the right to a charge a tenant that fails to meet these requirements [Clause, Sec. 13]. 

14. Limitation of Landlord’s Liability to Tenant for Use of Conference Center

The tenant should acknowledge that its use of the center is at the tenant’s sole risk and that neither the landlord nor its agents will be liable for any injuries, liabilities, damages, expenses, etc., that may arise out of that use [Clause, Sec. 14].

15. Tenant Duty to Indemnify Landlord

As an extra layer of legal protection, the clause requires the tenant to indemnify the landlord and its affiliates “from and against all claims, losses, damages, liabilities, or expenses incurred (including attorney’s fees)” as a result of tenant’s use of the center [Clause, Sec. 15].

16. Landlord Right to Modify Conference Center Terms

Last but not least, the clause provides for future contingencies and changes by reserving the landlord’s right to add, remove, or modify any of the requirements set forth in the provision governing tenant’s use of the center and to change its methods of operating the center to provide for the maximum enjoyment of all tenants in the building [Clause, Sec. 16].