As the retail landscape continues to adapt to in- creasing demand for e-commerce and shifting consumer needs in the wake of the pandemic, some landlords have elected to reinvest capital to update or redevelop aging centers. Others have focused their efforts on finding creative and cost-effective ways to utilize existing common areas. This article focuses on the latter scenario and highlights some emerging changes observed in retail common areas and corresponding risks that tenants should be aware of when negotiating shopping center leases.
One noteworthy change to retail common areas has been the emergence of electric vehicle (EV) charging stations. These stations are usually operated pursuant to license agreements between landlords and third-party providers that install and operate EV charging stations and pay a license fee to landlords. Installation of EV charging stations has proven an attractive way for landlords to offset vacancy issues while filling parking lots with new customers in need of EV charging.
However, while the center at large may benefit from new customers, these stations can become an obstacle to tenants, as many EV charging stations are located in close proximity to storefronts (and the electric grid needed to power them). They encumber spaces most convenient for customer use, including those most conducive to e- commerce needs (e.g., pickup, delivery and exchanging items bought online).
Accordingly, tenants whose accessibility needs are paramount should take special care in protecting parking that is essential for their use. This can be accomplished during lease negotiations by (i) designating no-build or no-change areas over nearby parking spaces integral for tenants’ use, (ii) imposing restrictions prohibiting EV charging over some or all tenant parking areas and/or (iii) negotiating tenant approval rights regarding the location of EV charging station areas as a condition of their installation.
Also note that some EV charging stations include built-in screens designed for advertisements that may prove competitive with a tenant’s use, so tenants with high brand sensitivity may also want to consider expanding exclusive use provisions to restrict competitive advertising.
Other emerging common area uses are more temporary in nature and can involve events and attractions brought to centers by landlords to boost revenue, such as food trucks, family-friendly events, farmers markets, holiday markets and mobile healthcare testing and vaccination sites. While these uses may benefit tenants by increasing foot traffic, they can also present a variety of undesirable consequences that should be addressed in negotiations of lease and title documents. These can include disturbing noise, odors, litter, traffic congestion and parking concerns. These consequences can be further exacerbated when tenants are responsible for footing the bill.
Therefore, tenants should also consider protection from costs associated with common area events, paying special attention to common area maintenance (CAM) cost provisions in their leases. Retail leases frequently require tenants to reimburse the landlord for CAM costs, which are often defined broadly in landlord lease forms and could very well include the landlord’s costs in hosting common area events that do not benefit tenants.
Tenants can address these concerns by expressly excluding or capping costs for common area events or attractions, limiting CAM costs to landlord’s repair and maintenance only (with certain reasonable exceptions), offsetting CAM costs by sharing in event profits, defining common areas to exclude areas used for such events (and the corresponding costs) and/or requiring temporary users to contribute to CAM costs.
In any event, tenants should endeavor to require adequate evidence of CAM costs and calculations from landlords, as well as audit rights, in order to understand and verify the expenses for which they are responsible.
As these examples suggest, it is important for retail tenants and their counsel to stay informed of emerging changes to centers so that they can assess new risks and discuss their concerns with landlords at the outset of lease negotiations to avoid future disputes.
Charleston Morford
Associate
Nolan McKeever
Associate
Baker Hostetler
1170 Peachtree Street, Suite 2400
Atlanta, GA 30309
cmorford@bakerlaw.com
nmckeever@bakerlaw.com
(404)459-4216
