Negotiate Seven Safeguards When Giving Building Name Privileges

Retailers aren’t the only type of tenant that prioritizes advantageous signage. Major office building tenants like banks or financial firms may also demand special name and signage privileges, sometimes in return for renting a large block of space. Most commonly, a tenant will want the most prominent signage on the building’s exterior and in the lobby. But in some cases, a tenant may insist that the building be named after it, in an effort to increase name recognition in the community.

It’s of key importance to entice major tenants with these privileges without infuriating existing tenants or hampering your lease negotiations for vacant space in the building. So, if you’re willing to agree to a special building name or a signage demand, negotiate seven protections in the lease to avoid pitfalls. Like our Model Lease Clause: Protect Your Interests When Giving Building Name Privileges, your lease should have the following safeguards.

Safeguard #1: Give Privileges to Original Tenant Only

Make it clear that the special name and signage privileges are intended only for the original tenant, not a subtenant or assignee [Clause, par. a].

Safeguard #2: Set Strict Signage Requirements

Keep control over the tenant’s signage with five requirements:

Standards. Set strict standards for the tenant’s signage. Attach architectural drawings of the agreed-upon signage to the lease as an exhibit. Make sure your lease requires the signage to conform to the exhibit. And say that the sign can’t deviate from the exhibit without your prior written approval [Clause, par. b(i)].

Legality. Make it the tenant’s job to ensure that its signage violates no laws, codes, rules, or regulations, such as local zoning or building department codes [Clause, par. b(ii)].

Approvals/permits. Require the tenant to get and pay for any needed governmental approvals or permits for the installation and maintenance of the signage [Clause, par. b(iii)].

Insurance. Require the tenant to insure the signage under its liability and property damage insurance policies [Clause, par. b(iv)]. Then, if someone gets hurt by the signage or if the signage is damaged, the tenant’s insurer should cover the claim.

Maintenance. Require the tenant to clean and maintain its signage on a regular basis at its own cost. You don’t want the signage to become an eyesore [Clause, par. b(v)].

Safeguard #3: Require Tenant to Pay All Signage-Related Costs

Make the tenant responsible for paying all costs associated with the signage—including design, installation, maintenance, cleaning, repair, and replacement costs [Clause, par. c(i)]. If you allow the exterior signage to be illuminated, get the tenant to agree to pay all illumination costs, specifically electric bill charges; if you’ll be billed for any of the costs, say the tenant must reimburse you for them immediately upon getting your invoice [Clause, par. c(ii)].

Safeguard #4: Get Right to Cancel Signage Privileges

Get the right to terminate the tenant’s special name and signage privileges—for example, remove the name at the tenant's cost and expense if the building was named for the tenant—if any of the following events occurs:

Tenant ends or reduces its presence in your building. Specifically, the tenant: (1) moves out or occupies less than a certain amount of its space; (2) sublets more than a certain amount of its space; or (3) assigns its lease [Clause, par. d(i)–(iii)]. You agreed to name a building after a tenant because of the tenant’s importance to the building. If it no longer has a significant—or any—presence at your building, it no longer merits having its name on your building.

Tenant has another building named after it. You may want to terminate the special name and signage privileges if the tenant has another building in your business district or within a certain distance of your building named after it [Clause, par. d(iv)]. A duplicate name may cause confusion and damage your building’s reputation.

Tenant is in default. Get the right to terminate the special name and signage privileges if the tenant is in default of the lease [Clause, par. d(v)]. Expect the tenant to demand that you be required to give it advance notice and an opportunity to cure—but no longer than required by any applicable governmental authority—if you intend to end its privileges and remove its name from the building [Clause. par. d(v)].

Safeguard #5: Require Tenant to Remove Signage

Say in the lease that if you change the building’s name or the lease ends, the tenant must remove its signage. Also, require the tenant to fix any damage caused by the signage’s installation or removal at the tenant’s expense [Clause, par. e(i)]. Make sure the “survival” clause in your lease says that these removal and repair obligations will survive the lease’s expiration or termination [Clause, par. e]. Otherwise, once the lease expires or is terminated, the tenant may claim that the obligations no longer apply.

Safeguard #6: Get Right to Keep Signage

Get the right to keep the signage in place even if the tenant is no longer in your building, but require the tenant to reimburse you later for removal costs. Your building could benefit from keeping the signage up, especially if the tenant is a prestigious company. Have the tenant agree that when you eventually decide to remove the signage, it will reimburse you for the removal costs and for repairing any damage to the building caused by the removal [Clause, par. e(ii)].

Safeguard #7: Allow Other Tenants to Put Up Signs

Don’t say in the lease that the tenant has an “exclusive” right to put up signage on or in your building. Make this right “nonexclusive” so that other tenants can put signage on or in your building, too, but not greater in size than the prime tenant's sign [Clause, pars. a & f].

Insider Source

Stuart D. Byron, Esq.: 200 Madison Ave., 26th floor, New York, NY 10016.