Reserve Right to Redesign Your Center Later

Be careful when providing site plans to a tenant. It can accidentally lock you into plans for your center that you may want to change later without a hassle from the tenant. You never know what will happen that will require you to reconfigure any number of things at your property, and you need the freedom to do so.

One way to reserve the flexibility you need is to make the site plan nonbinding. During negotiations, it’s common practice for owners to use a site plan (usually a depiction of the general layout of the ultimate buildout of the property) to show the prospective tenant where things will be located at the center. If the tenant approves of the site plan, it typically will be attached to the lease. Site plans vary and, depending on the size, leverage, and bargaining power of the tenant, can be very general in nature or very specific. Typically, tenants try to be as specific as possible and owners try to keep the site plan as general and nonbinding as possible.

Understand that large tenants especially are more likely to push for binding plans. Anchor or big box tenants probably can dictate where buildings can or can’t be located now or in the future, the height of new buildings, and how many buildings and outparcels are allowed.

For three key items that tenants will be especially concerned with, how you can deal with them, and model lease language you can adapt, see “Negotiate Flexibility to Change Shopping Center at Later Date,” available to subscribers here.