Editor’s note: this is part of an NRTA series regarding tenants’ rights when a shopping center loses occupancy levels. You can find the introduction here.
If a lease doesn’t have a co-tenancy provision, small business tenants still should closely review the lease to identify other options that may provide rights when a center begins to lose occupancy levels.
In many leases, the landlord has a covenant stating that they will do something for the benefit of the tenant. For example, the landlord may pledge to maintain common areas consistent with a first-class shopping mall, conduct marketing and promotional activities, or provide security and other services. If the shopping center is failing, and if the landlord fails to maintain it properly or comply with its marketing or security obligations, the landlord would be in breach. The lease will often set forth the remedies available in the event of a breach.
Furthermore, landlords may state in a lease that they will provide certain things to the tenant, such as a first-class shopping center or regional retail development. A lease may include a specific description of the shopping center or attach a map of the center and its individual retail stores. If the shopping center no longer fits the description as determined in the lease, the landlord may be in breach and subject to a claim for damages.
Even language relating to the tenant’s obligations in the lease may be useful when the center is failing. For example, a tenant may agree that its sales practices will be consistent with standards and practices generally accepted in “enclosed first-class, full-retail-price regional shopping centers.” If the landlord has made changes to the center such that it is no longer operating a “first-class full-retail-price regional shopping center,” the landlord could be in breach of the lease.
These types of provisions and bindings demonstrate that the parties intend for the shopping center to be more than the collection of leasable space. Instead, the parties intend for the shopping center to be a destination in and of itself. As a tenant enters into a lease, you agree to lease space in the shopping center as it existed at the time of the execution of the lease. A substantial change to the center could be a breach of the lease, entitling the tenant to relief.
For more information, contact the NRTA office at (413) 525-4565 or by filling out this form.