Retail Tenants Are Asking for New Lease Provisions

Will Retail Rents Ever Return to Pre-Pandemic Levels?

New retail leases look different than they did before the pandemic. Retail tenants are calling for new rental regulations and protections in a number of areas. According to Gary Glick, a partner at Cox, Castle & Nicholson LLPThese new regulations include new building regulations, dedicated short-term parking spaces, opening requirements, operational requirements and termination rights.

In newer leases, building codes play a central role in these changes, as new retail leases also add tenants. "Once the landlord has handed over the premises to the tenant, the tenant does not want to be required to upgrade their space until they know that certain government restrictions that affect their operations have been lifted," Glick told “For example, a gym or restaurant may not want to start building its tenant improvements until it knows it can operate without significant capacity constraints. In this situation, the landlord may want a "put right" that forces the tenant to start construction within a specified period, such as six months, or that gives the landlord the right to terminate the lease. "

This can be difficult for landlords to navigate, especially individual renters. "A termination can make the landlord vulnerable if the expansion of the room contains a number of items that are specific to the use of the tenant," says Glick. "In this case the landlord can ask the tenant to refund these items."

Short-term parking spaces are becoming more common in a post-pandemic world. Park changes are usually caused by roadside pick-up activity, which has been an essential way for retailers to grow business during the pandemic. "During this pandemic, roadside collection has been a lifeline for many restaurants and retailers unable to dine indoors or shop in-store," says Glick. "As a result, many retail tenants now need some short-term parking spaces in front of their premises for pick-up and delivery."

In most cases, this is a request that landlords can consider. “Most landlords should be able to comply with this request as long as the space made available is not exclusive in order not to violate existing rental agreements or covenants, conditions & restrictions, which generally require that all parking spaces are not used exclusively "Says Glick." Landlords should ensure that they do not have to monitor or enforce the newly designated short-term parking spaces and that the cost of new signage is covered by tenants. "


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