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Lease agreements with shopping centers. 10 important points

After the easing of quarantine restrictions, the commercial real estate market has revived slightly. Some tenants have not survived quarantine and are being replaced by new players. It would seem that shopping centers need to be more flexible in negotiating with potential tenants. However, so far they are making concessions only in the commercial part of the agreement. Instead, there was no flexibility in agreeing the terms of the agreements. Exceptions are powerful brands in which the shopping center itself is interested. This article is brief about the important points that you can find in leases with many shopping centers.

  1. Possibility of unilateral increase in rent. Make sure that the contract has clear restrictions on the amount and frequency of rent review. For example, it is permissible to review the rent once every 1-2 years for no more than 5%.
  2. Compensation payments. Very often in contracts with the shopping center you can find items to compensate for the cost of shop windows, meters, certain repairs. Agree on such amounts in advance so that after signing the contract it does not come as a surprise to you. It is also very often possible to agree on installments of such compensation payments.
  3. Warranty payment. He is always there and that's okay. It is worth paying attention to how clearly defined the cases of return of the guarantee payment or its crediting for the last months of the lease.
  4. Approval of the decoration of the store. It is normal to agree with the administration of the shopping center on the appearance of the window. However, sometimes in the contracts we find provisions for the written approval of all interior decor in the store. In most cases, such provisions do not work and few will agree on the interior scenery. However, the lawyers of the shopping center include in the contract such non-working items for potential fines for disobedient tenants.
  5. Preparatory repair and restoration of the premises before departure. Pay attention to the terms and procedure for approving the project of repair work, the requirements for contractors that you will involve in the repair. Agree the term of the repair with the stock, because in most contracts there are very large penalties for late opening of the store. Also pay attention to how you should return the room. Very often after the lease you will need to dismantle everything you have installed, even the floor tiles. Agree on this in advance and take this into account when carrying out repair work.
  6. Limitation of liability of the shopping center. There may be several options and sometimes they occur simultaneously. The shopping center is responsible only for the damage caused by his intentional actions, and the Lessee is responsible for everything else. That is, if during the construction the installers did not properly install the fire extinguishing system and it accidentally worked and flooded your store, the shopping center will not be responsible for this, because no one intentionally turned on the fire system. The shopping center is responsible only within a certain amount, for example, a monthly rent. That is, if you pay 100 thousand for rent, and broke the pipe in the store and flooded the goods for 1 million, you will receive only 100 thousand compensation.
  7. Reduction of rent for the period of quarantine or during protests. Everyone already knows that such cases are not fantasies of lawyers about possible force majeure. If the shopping center is in the administrative district of the city, it happens that it cannot work due to various protests. Also, all stores in the mall can be closed to visitors due to the next quarantine. Agree in advance the percentage of rent you will pay during this period. Otherwise, during the next quarantine, you will have to either count on the goodwill of the shopping center and a unilateral reduction of rent, or defend their rights in court.
  8. Huge penalties. The penalty should motivate the tenant not to violate the terms of the contract, and not to drive him into debt bondage. Therefore, the size of fines should be proportional to the consequences of possible violations. Also make sure that the violation for which you can be fined is clearly stated in the contract.
  9. Possibility of early termination of the contract. There are both successes and failures in business. Therefore, it is necessary to provide for the possibility of early termination of the contract on adequate terms. It often happens that the contract stipulates the right of the tenant to terminate the contract, but only a year or two after the start of the lease. It is also sometimes necessary to give four or more months' notice of early termination. Pay attention to what will happen to the guarantee payment if you terminate the contract early.
  10. TC rules. Sometimes landlords read the contract itself and forget to read the rules of the shopping center. These are in many shopping centers. When the contract can still be changed, no one will rewrite the rules for the tenant. At the same time, the contract often provides for significant penalties for violating these rules. Therefore, read them before concluding a contract and try to adhere to them.

We have described only some of the points that need to be considered when analyzing leases with shopping centers. Even this minimum will help you not to lose money and agree on adequate working conditions with the mall. However, each contract is individual, so enlist the support of a qualified lawyer during negotiations with the future landlord.


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