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Don't be surprised when a new tenant that has decided to rent office building or shopping center space from you wants to make requests early in the lease negotiating process. Typically, tenants make these requests in a letter of intent (LOI), a document that's signed by the tenant and owner indicating both parties' intent to sign the lease that they're considering. The LOI is your chance to clarify key terms and make sure that the tenant doesn't approach you later claiming that it misunderstood what would be included in the final draft of the lease.
Conduct an Internet search for “creative leasing ideas” for retail properties, and you'll see a lot of references to leasing to nontraditional uses, such as libraries and community art galleries, or exploiting pop-up store opportunities. Used correctly, these are valid options that have filled space and increased traffic for shopping center owners. But when you start to consider creative leasing, you should first look to creative ways to attract long-term retailers to the shopping center and keep them.
Effectively managing snow and ice accumulations is a critical component of maintaining commercial properties in a safe condition. Whether you're the owner of a large commercial property with sufficient in-house personnel and the appropriate equipment necessary to do your own snow removal, or you own a smaller property and must hire an outside contractor to perform this service, your lease provisions should specify who's responsible for the many aspects involved in snow and ice removal services—you, the tenant, or both.
As a retail property owner, you know that the success of your strip mall or shopping center largely depends on the mix of tenants you rent space to. Tenant synergy—that is, stores functioning together to draw shoppers that a center normally wouldn't capture without them as a group—can make or break your center's profitability. That's why it's important to have each tenant commit to continue operating the same way—selling the same type of goods or services—that fits your strategy.
Two types of repair covenants are standard provisions in almost all commercial leases. One type of repair covenant specifies what a tenant is required to do to maintain and repair its space while the lease is ongoing. The second type of repair covenant specifies what condition the space must be in at the end of the lease—in other words, what items the tenant has to repair before turning over the space to the owner when the lease is terminated or the lease term expires.
We are seeing an increase in cases in which building owners that have not previously leased space to the government find themselves landlords to federal government tenants, either by acquiring a foreclosure property with a government lease or by participating in a government procurement and securing a lease award. There are a host of advantages to housing a government tenant, especially in a “down” economy.
Traditionally, renting space to kiosks—small, independent stands that sell merchandise—has been a low-maintenance and relatively hassle-free way of supplementing shopping center profits—if it's done correctly. And, for the last two seasons, pop-up tenants—temporary stores that sell only one type of merchandise—have boosted drooping profits from declining sales at traditional “core”—that is, permanent—stores in centers.
Requiring tenants to give you a security deposit before moving into the office building or retail space you own can help protect you if you later can't collect rent from them or need to pay the cost of repairing damage they may have caused. But depending on a security deposit to give you protection if a tenant doesn't meet its lease obligations can be dangerous if you don't have the right to increase the amount when certain costly events occur.
Commercial tenants typically want the right to “go dark”—that is, stop operating while continuing to pay rent—if their businesses aren't generating enough revenue. “Going dark” can save tenants the cost of stocking and staffing the space they rent. But if you give a tenant the right to go dark, you may want to carve out a recapture right for yourself—allowing you to take back the space and replace the tenant.
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