Require Tenants to Conform to New Signage Criteria

In the excitement and administrative hustle and bustle of redeveloping their centers, some owners discover they’ve overlooked one very important aspect of the redevelopment—namely, making sure that the overall look of the updated center isn’t interfered with by tenants. To require your tenants to conform their signage to your redeveloped center’s new signage criteria, your leases should take into account the potential for center redevelopment.

List Tenant’s Redevelopment Requirements in Clause

To get the tenant to adapt its space, signage, and storefront if you redevelop the center, your lease should require the tenant to promptly take all actions that you request (in your sole discretion) for this purpose. A clause, like our Model Lease Clause: List Tenant's Responsibilities After Center Redevelopment, with this broad language gives you a lot of power to get the tenant to adapt its space (including its signage and storefront) to the new design and systems of the redeveloped center. Your clause should also make the tenant, not you, solely responsible for paying the costs of adapting its space. You don’t want any doubt that the tenant must foot this bill [Clause, par. a].

It’s also a good idea to list some of the actions that you may require the tenant to take to adapt the space to the redevelopment. This way, you can avoid disputes later on about what the tenant must do. For example, your list should include the following:

Remove existing signage. You may need the tenant to remove its existing storefront sign so that you can accomplish your redevelopment work [Clause, par. a(i)].

Install new signage. You’ll probably want to demand that the tenant install new signs in conformity with any storefront signage standards that you establish for the redeveloped center [Clause, par. a(ii)].

Upgrade building systems. You may want to require the tenant to upgrade any portion of the base building systems in or serving its space. For example, you may want the tenant to upgrade the HVAC system in its space [Clause, par. a(iii)].

Remodel storefront. It may be important to get the tenant to remodel its storefront so that it conforms to the overall storefront design of the redeveloped center [Clause, par. a(iv)].

Alternatively, you may decide to remodel the tenant’s storefront yourself as part of the overall storefront and/or façade remodeling. Require the tenant to reimburse you for its share of your remodeling costs in that situation. The tenant’s share should be calculated based on the proportion of its frontage to the frontage of all stores in the center remodeled at the same time. Have the tenant pay its share of those costs as additional rent in the month after you complete the remodeling work and give the tenant your invoice [Clause, par. b].

Note, however, that a national chain tenant may refuse to agree that it will remodel its storefront or let you remodel it if the new look will deviate too much from the look of the other stores in its chain.

Don’t Allow Too Many Limits on Requirements

Expect a strong tenant to try to limit the requirements you can impose. For instance, the tenant may:

Demand reasonable required actions. A tenant may agree only to take actions that you “reasonably” require to adapt its space to the redeveloped center. Otherwise, you could impose all sorts of unfair requirements, the tenant may argue. Depending on the tenant, you may have to agree to that modification.

Try to limit how much it must pay. A savvy tenant will most likely try to limit how much it must pay to adapt its space to the redeveloped center. For instance, it may demand one or more of the following limits:

• You pay the costs of adapting the tenant’s space, and then add those costs to the tenant’s rent over a period of time so that the tenant isn’t hit with a big expense all at once;
• You cap the tenant’s costs to adapt its space so that it won’t have to pay an excessive amount—that is, you pay any costs over the cap;
• If the tenant’s lease is near its end and it must pay the costs of adapting its space, you extend its lease so that it will get some benefit from the adapted space; and/or
• If the tenant had already spent a lot of money to redo its space, you alone pick up the costs of adapting its space so it won’t have to incur more costs.

The extent to which you may have to accept these limitations depends on the tenant's negotiating strength, the desirability of the tenant, and the particular situation.