Drafting Tips

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A creditworthy tenant dealing with an overly cautious lender may be confident that its financing will go through, but won’t want to wait until the deal is complete before it signs the lease. Don’t be surprised if the tenant asks you to give it early access to its space, so that its opening isn’t delayed. This may seem harmless, especially if it’s a good tenant and you’re afraid it’ll go elsewhere if it can’t set up shop pre-lease.

Rent abatement clauses spell out the circumstances under which tenants are entitled to withhold rent. But if you don't draft them carefully, you may overlook specific items that can affect you later if the tenant exercises its right. Here are four Dos and Don'ts to follow to avoid omitting commonly overlooked details. Ask your attorney about including the provisions below in the rent abatement clause in your lease.

Your lease will specify under what circumstances you and the tenant may terminate the lease. It'll also spell out the procedure you must follow to do so—for example, by giving 30, 60, or 90 days' written notice. If the provisions in your lease that govern termination rights are drafted ambiguously, you may be left with a more limited right to get out of the deal than you intended. For example, you might intend to give yourself an ongoing termination right when certain events take place, such as the tenant failing to pay common area maintenance fees.

Whether you're negotiating your snow removal contract or approving your tenant's, the contract should:

Identify term of agreement and exact services to be performed. This includes which areas will be plowed; the minimum snow accumulation amount before plowing, sanding/salting, and/or shoveling will begin; if the plowing will begin automatically or only upon request from the owner/manager; the mixture (ratio) of sand to salt; the type of ice melt product that will be used; and the times that the plowing will be done (usually late evening/early morning).

Retail real estate experts predict that more, not fewer, national-brand “pop-up” shops will appear in shopping centers this holiday season than during the past few years. Pop-up shops can be a great way to add pizzazz to your center, but only if you protect yourself from common risks that temporary tenants can present.

If you own a shopping center or strip mall, some of your retail tenants will probably ask you to allow them to operate during hours that are the most convenient for their businesses, even though you've set operating hours for the entire center. And you may be tempted to give some tenants, especially those who bring a lot of foot traffic to the center or have a lot of leverage, discretion for setting their own operating hours, instead of operating during the period of time that you plan to run the center or strip mall.

A smaller tenant that's negotiating a lease for space in your shopping center may want to negotiate a cotenancy clause that requires you to rent to a “national retailer.” You may be willing to include such a clause, especially if you're already negotiating a lease with a specific national tenant. But if that deal falls through and you end up renting to a tenant that's well known, but operates in only one region of the country, your smaller tenant may claim that you've violated the cotenancy requirement in its lease.

Nowadays, many restaurant tenants ask to use common areas next to their space as a patio area, where they can place tables and chairs, and serve food. These patio areas are cropping up all over—even in shopping centers. But if you allow the restaurant tenant to use part of your common areas as a patio area, make sure that your lease properly protects you. Otherwise, you could have trouble down the line. For example, you could end up in a dispute with the tenant if the patio area hampers the flow of pedestrian traffic into and out of your building or center.

If you're like many owners of shopping centers or office building complexes, you're eager to find new ways to generate income. One solution may be to add a food court—that is, a special area dedicated to small restaurant tenants selling a diverse selection of carry-out or ready-to-eat food customers can consume in a common seating area. At shopping centers, a food court not only can generate additional income for you, but can help extend the length of shopping excursions—and when customers stay longer at a center, they're very likely to buy more.

Problems can arise when a restaurant tenant draws so many customers that long lines—often referred to as “queues”—form, or crowds gather in the common areas near the restaurant. Someone could get hurt if a queue or crowd becomes disorderly or unruly, and, as the owner, you could be liable. To avoid a lawsuit, negotiate in the lease that the tenant must maintain tight control over its customers, and carve out your right to enforce additional controls.