Limit Your Liability for Blocking Visibility, Access to Tenant’s Storefront

Unlike office building tenants, many retail tenants rely on foot traffic to bring in at least some of their sales. If you own a shopping center for long enough, you’ve probably had to do maintenance work or make repairs to your property, which may have included erecting scaffolding or setting up other equipment that blocked storefronts to some degree. Because retail tenants are concerned about keeping their storefronts and window displays visible to potential customers—and providing easy access if a customer chooses to shop there—it’s common for them to ask for a lease clause barring you from doing anything that makes their space harder to see or get to.

This seems like a reasonable request. And, after all, if the tenant pays percentage rent, increased sales will ultimately help you, too. But this kind of prohibition has the potential to cause serious problems for you if you need to do maintenance work, want to renovate or re-landscape the shopping center or add new buildings, or are considering staging a promotional event that will take up space at the center and possibly block storefronts. But there’s a compromise you can use with the tenant so that you both win. We’ll explain how to protect your tenant’s visibility and access without hurting yourself. And we’ll give you a Model Lease Clause: Give Tenant Protected Area in Center, which you can adapt for your leases.

Benefits of Creating Protected Area

Establishing a “protected area” in front of the tenant’s space in which you agree not to place obstructions is a good way of responding to the legitimate concerns of the tenant while protecting your own interests—if you set out specific exceptions that allow you to act within the protected area, says Ohio attorney Abraham Lieberman.

Many leases simply say that the owner won’t cause any unreasonable or “material” interference with the tenant’s access or visibility. But this can cause confusion, uncertainty, and disputes. Neither the owner nor the tenant may know exactly what its rights are.

Let’s say that you agree not to do anything that “materially” interferes with a certain tenant’s visibility, but later you decide to add a new building to the shopping center. You don’t think the new building will materially interfere with the tenant’s visibility, but the tenant disagrees and threatens to sue. You should realize that just about anything can interfere with a line of sight from somewhere. You may not be able to construct the building, or you may end up paying the tenant or making some other concession you didn’t intend to when you signed the lease in order to avoid a lawsuit.

But if your lease clearly sets up a specific protected area, you can save yourself the uncertainty, aggravation, and expense of threatened litigation. You can rest assured that you may erect a building outside of the protected area without a challenge from the tenant.

How to Define Protected Area, Activities

Naturally, your tenant will jockey for the largest possible protected area, while you’ll want to limit its size. In negotiating a protected-area definition, it’s important for the owner to anticipate its future needs—particularly any remodeling plans, says Lieberman. He warns that an owner who anticipates building a new structure or expanding the present center should make sure the limits of the protected area don’t include the site of the new building or expansion.

In negotiating the size of the protected area, you and the tenant also should consider what you’ll be allowed to do inside that area. You may be willing to increase the size of the protected area in exchange for greater freedom to act within it. On the other hand, the less willing a tenant is to give the owner flexibility within the area, the smaller you should try to make the tenant’s protected area. Once the protected area is defined, carve out the following rights for yourself:

Right #1: Erect scaffolding to maintain or renovate building. Insist on the right to erect scaffolding or other temporary structures needed to maintain, repair, renovate, or expand the building where the tenant’s space is located. You should also have the right to erect these temporary structures in connection with the construction of a new building. Without this right, you may find it impossible to do necessary work. In your lease, indicate how many days an obstruction can remain and still be considered temporary [Clause, par. 1(d)].

Right #2: Change center’s configuration, decor. Insist on the right to change the size, shape, or placement of drives, parking areas, and walkways at the center. You may also want to modify or add to the center’s decoration, lighting, and traffic control [Clause, par. 2].

Right #3: Work above or below protected area. You may want to work on the landscaping in the protected area or secure access to overhead electrical lines if there are any within the area. Or you may want to put up signs or holiday decorations overhead. Nothing placed on the ground (if it’s less than a couple of feet high) or above a certain height is going to affect the visibility of the space or anything inside. So, get the right to place obstructions in the protected area at heights that are either low enough or high enough not to impair the space’s visibility, as long as access to the space isn’t denied [Clause, par. 1(a)].

Right #4: Stage special promotions. Promotional events like art shows, hobby-related exhibits, and raffles or drawings for attractive prizes at your center have the potential to draw positive attention and new shoppers to the property. While they don’t last long, they may require installing displays or temporary structures in the protected area. So, make sure to get the right to put temporary structures and displays in the protected area in connection with promotional events [Clause, par. 1(b)]. Be prepared for some pushback from the tenant; it’s likely to ask for a limit on how many days the promotional structures and displays may remain.

Practical Pointer: Although these rights work best in an outdoor or strip shopping center, most also apply to indoor shopping malls. If you own an indoor shopping mall, ask your attorney about making minor changes. For example, an indoor mall owner may want the right to hang banners with the mall logo or information about current or upcoming promotions from the ceiling in front of the tenant’s space. Other changes and additions depend on the needs at the particular mall.

Insider Source

Abraham Lieberman, Esq.: O’Toole, McLaughlin, Dooley & Pecora Co., LPA, 5455 Detroit Rd., Sheffield Village, OH 44054; www.omdplaw.com.