Designating Tenants' Operating Hours
If you own a shopping center or strip mall, some of your retail tenants will probably ask you to allow them to operate during hours that are the most convenient for their businesses, even though you've set operating hours for the entire center. And you may be tempted to give some tenants, especially those who bring a lot of foot traffic to the center or have a lot of leverage, discretion for setting their own operating hours, instead of operating during the period of time that you plan to run the center or strip mall.
However, it's important to maintain control over your center's operating hours, says Toronto solicitor and Insider board member Harvey Haber. “Shopping center owners should designate in their leases the hours of business during which the center is to be open for business,” he advises.
Continuity is key, notes Haber. If hours are set by anyone else besides the owner, that owner could come in one morning to find that a number of its tenants' stores are not open to the public, he adds. “Allowing stores to open and close when they choose to could result in a huge loss of revenue for the owner,” warns Haber.
Carve Out Sole Right in Lease to Set Schedule
Strongly indicate in the operating hours provisions that the hours of business for the center are to be “designated solely by the owner.” And specify that tenants that don't adhere to this provision will be in violation of the lease.
Provisions covering operating hours should also include remedies for the owner, in case a tenant decides to operate on a schedule that it prefers—but that's inconsistent with the hours you've set for your center. “An owner wants to retain all of its rights in the event of a default by a tenant, including the right to terminate the tenant's lease,” stresses Haber.
Bar Retail Associations from Setting Hours
Don't allow the tenant to negotiate terms in its lease that allow the local merchants' association or any other group of local retailers in the area to designate the hours during which your center is to be open for business.
“The owner, and only the owner, should have the right to determine the hours of business for tenants,” says Haber. “Otherwise, the owner will have stores opening and closing when they want—and not when the owner wants,” he warns.
Allow Limited Exceptions to Schedule
Be aware that some tenants will negotiate, and you should allow, some exceptions to your operating hours provisions. It's common for major tenants, movie theaters, and restaurants to ask for extended operating hours because the nature of their businesses requires them to be open in the evening or even late at night. They might also ask for an exception to be made so that they may open later in the day, because they don't offer products or services during morning hours.
Exceptions to your center's standard store hours for these tenants may make the difference in attracting or retaining them. You should also be prepared to permit tenants to close for religious or national holidays, if they request it.
Insider Source
Harvey M. Haber, Q.C., J.D., LSM, DSA, C. MED., C. ARB., B.A.: Senior Partner, Goldman Sloan Nash & Haber LLP, 480 University Ave., Ste. 1600, Toronto, Ontario M5G 1V2; www.gsnh.com.
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