Use License Agreement, Not Lease, for Parking Lot Business
Letting a business use a portion of your outdoor parking lot can be an innovative way to earn additional revenue and boost traffic at your center. While business-related activities, such as book sales, car sales, and boat sales seem to be a relatively quick and easy way to bring in more cash and positive publicity for you and your tenants, they can get out of hand and jeopardize the center if you don’t control them in a way that’s conducive to your regular operation—the one that tenants have carefully negotiated for. Because business-related parking lot events typically last no longer than a few days, you should negotiate a “license agreement” rather than a lease. Follow these 11 "Dos & Don'ts" when negotiating such a license. They can help you keep tenants happy and avoid violating your obligations to them, while also allowing you to take advantage of the opportunities that parking lot temporary businesses can provide.
Control Length and Limit
Don’t give parking lot licensees too much leeway. Control the length and the limit of the license. Why? The center’s parking lot is an essential part of your center’s success. To retain control, grant the licensee only a “nonexclusive, revocable, and nontransferable license” to operate in a designated portion of the parking lot. And make it subject to the terms and conditions set out in the license agreement. By making the license “nonexclusive,” you can grant licenses to other parties that have a right to use that area under leases or other agreements. “Revocable” means that you can take back permission to use that portion of the parking lot, at your discretion. And “nontransferable” bars the licensee from transferring the license to anyone else. To do this, use the following language in the license:
Model Language
Subject to the terms and conditions set forth herein, Licensor hereby grants to Licensee a nonexclusive, revocable, and nontransferable license for the use of and right to occupy the License Area, as defined herein.
Accept Specs in Advance
Identify a specific location within the parking lot for the “license area” to prevent the licensee from using a prime parking location and taking up lots of parking spaces that are vital to tenants. An out-of-the-way portion of the lot—especially one that isn’t dedicated to parking spaces—is ideal. Also, limit the size of this license area to a maximum number of square feet so that you can better control how many parking spaces will become unavailable when the license area is in use.
You should also make the exact size, dimensions, and location of the license area subject to your approval. Require specific plans that show a rendering of the license area with its size, dimensions, and location from the licensee—before it sets up shop.
Model Language
The license shall apply to the area located within the “crosshatched” portion of the parking lot, as indicated on the site plan as Exhibit [insert #] attached hereto, and whose size, dimensions, and exact location (the “License Area”) are subject to the approval of Licensor. Licensee shall submit plans of the License Area, for Licensor’s approval by [insert date]. Such plans must include, without limitation, a proposed rendering with proposed size, dimensions, and location of the License Area. In no event shall the License area exceed [insert #] square feet of the parking lot. If Licensee does not receive Licensor’s written approval of such plans within [insert #] days after their submission, this License Agreement shall become immediately null and void.
Don’t Allow Common Area Usage
Don’t give the parking lot licensee the right to use other portions of the center’s common areas, except as a way to get access to and from the license area. While you’ll have to accommodate the licensee by allowing it to use portions of the center that it must in order to run its business—for example, the center’s sidewalk to get to and from the license area—it’s reasonable to make the center’s common areas off-limits. Storing merchandise is a right that tenants, not short-term licensees, should be able to negotiate. And tenants could be angry if they feel that a licensee is allowed to use areas reserved for them.
Model Language
Licensee shall have no right to use other portions of the Shopping Center’s Common Areas for any purpose except for ingress and egress into and from the License Area.
To stop the licensee from finding a way around the lack of storage at the property, you should also control the amount of merchandise in the license area. Require the licensee to store or stock in the license area only those goods and merchandise that it intends to sell there. Otherwise, the sales area could turn into a storage area for goods the licensee doesn’t intend to sell.
Model Language
Licensee shall warehouse, store, and/or stock in the License Area only such goods and merchandise as the Licensee intends to offer for sale at retail, in, at, or from the License Area.
Offer Area in ‘As Is’ Condition
You shouldn’t have to spend money repaving or repairing the parking lot just so a licensee can use it for a few days. Require the licensee to accept the license area in its “as is” condition.
Model Language
Licensee acknowledges that it accepts the License Area in an “as is” condition without any obligation of Licensor to repair, repave, or make replacements.
Don’t Provide Utilities or Services
Don’t agree to supply any services or utilities to the license area. Make the licensee solely responsible for supplying services and utilities. This way, you won’t be held accountable if they’re inadequate or become interrupted.
Model Language
Licensor shall not be required to supply to Licensee any services or utilities for the License Area. Licensee shall arrange directly with all utility companies for meters, and pay all required costs of establishing utility service and all utility services furnished to or consumed by Licensee.
Require Clean Area, Trash Removal
Make the licensee responsible for keeping the license area neat and clean, and free of debris and trash. That responsibility should include policing the other portions of the center’s common areas on a daily basis to pick up any papers, fliers, and other debris originating from the licensee’s business. It’s also important for the licensee to keep the license area in good order and repair, so that you’re not left with a damaged lot.
Model Language
Licensee shall keep and maintain the License Area and the surrounding area, including any equipment serving the License Area, neat, clean, and free of debris and trash, and in good order and repair. Licensee shall also police the other portions of the Shopping Center’s Common Areas on a daily basis to pick up any papers, fliers, and other debris originating from Licensee’s business.
You also don’t want the licensee’s trash in the parking lot. Require it to put its trash in containers within the license area for collection, to monitor its trash, and to arrange and pay for the trash disposal.
Model Language
Trash and debris should be removed from one part of the license area, and placed in special containers in another part of the license area for removal. Licensee shall supply and install trash containers of adequate size, arrange for disposal of trash and debris, and police the [insert location, e.g., rear] of the License Area and around the trash containers. Licensee shall maintain within the License Area a trash Dumpster of a size approved by Licensor, at Licensee’s sole expense. Licensee shall empty the Dumpster as often as necessary (but at least [insert frequency, e.g., daily]) to avoid overloading, leakage, spillage, pest and rodent problems, and unsanitary conditions. Licensee shall not burn any trash or debris of any kind in or about the Shopping Center.
Don’t Give Up Too Many Parking Spaces
Don’t permit the licensee to use the license area in a way that would take up too many parking spaces. This includes using any portion of the parking lot outside the license area for commuter parking, long-term parking for excursion trips, or anything other than routine customer parking. For example, the licensee must not sell tickets to or stage a music concert in the license area. Otherwise, there may not be enough parking spaces left for your tenants and their customers. Also, the licensee must not be allowed to interfere with the normal business operations at the center.
Model Language
Licensee shall not engage in any activities in the License Area, including, without limitation, the sale of tickets for, or the staging of, transportation or entertainment events, which would result in the use of the Shopping Center parking area for commuter parking, long-term parking for excursion trips, or purposes other than routine customer parking, or which would interfere with the normal business of the other stores in the Shopping Center.
Prevent Delivery Disruptions
To prevent the licensee’s delivery trucks from disrupting your center and parking lot, restrict deliveries to a designated entrance and have the trucks park in a specified location. Also, state in the license agreement that the licensee can’t allow its delivery trucks to interfere with your tenants’ businesses.
Model Language
Licensee shall require its delivery trucks to use designated service entrances and park in service areas located [insert location, e.g., behind] the License Area. Licensee shall not allow its delivery trucks to interfere with the business of tenants and other occupants in the Shopping Center.
Don’t Allow Alcohol Sales
Don’t permit the licensee to display, distribute, sell, or store any alcoholic beverages without your prior consent. Customers who consume alcohol in the license area could become rowdy, disruptive, or dangerous. Also bar dangerous materials in the license area that could damage people and property.
Model Language
Licensee shall not display, distribute, sell, or store any alcoholic beverages or any dangerous materials without the prior written consent of Licensor.
Control Location of Licensee’s Parking Spaces
Specify where the licensee, its officers, agents, and employees can park their cars so that they don’t take up spaces designated for your tenants or their customers. For example, you could require them to park in a designated employee parking area. Make the licensee agree to give you the license plate numbers of its employees’ cars, if you request them. This way, you can monitor where those employees are parking. Require the licensee to use its “best efforts” to prevent its employees from parking their cars in any other areas of the lot.
Model Language
Licensee, its officers, agents, and employees shall park their automobiles only in those parking areas which Licensor from time to time designates as employee parking areas. Licensee shall, upon request, furnish Licensor with license plate numbers of automobiles of Licensee and its employees. Licensee will use its best efforts to prevent its employees from parking their cars in any areas other than those designated.
Require Licensee to Remove Equipment
Require the licensee to remove, at its sole expense, its equipment and any other property at the end of the license term, and repair damage, if any, to the parking lot. If any equipment or property is left behind, it should be deemed abandoned, but the licensee will remain liable for the cost of removing and disposing of it.
Model Language
On the Expiration Date or earlier termination of this License, Licensee shall quit and surrender the License Area in good order and condition, and at Licensee’s sole expense shall remove its equipment and any other property, and repair any and all damages caused by such removal. Any equipment or property not removed shall be deemed abandoned; however, Licensee shall remain liable for the cost of removal and disposal.