Don't Let Tenant Turn Store into Service Center

June 24, 2009

If a tenant with a successful Web site turns its store into a service center, a display room, or merely a counter where customers can return or exchange purchases from its Web site, there may be no merchandise for sale—and that could spell bad news for your bottom line. The service center won't generate any percentage rent if the tenant doesn't make any sales there. And a space used only as a service center will probably draw fewer people to your center than a store that's fully stocked with merchandise for sale.

If a tenant with a successful Web site turns its store into a service center, a display room, or merely a counter where customers can return or exchange purchases from its Web site, there may be no merchandise for sale—and that could spell bad news for your bottom line. The service center won't generate any percentage rent if the tenant doesn't make any sales there. And a space used only as a service center will probably draw fewer people to your center than a store that's fully stocked with merchandise for sale.

To avoid that situation, add language to the lease's use clause that requires the tenant to: (1) conduct its business in a way that will generate the most gross sales; (2) keep its entire premises fully stocked with merchandise that's available for immediate sale; and (3) be fully staffed at all times, which will allow customers to make purchases as easily and smoothly as possible.

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