IMPORTANCE OF CO-TENANCY PROVISIONS IN COMMERCIAL LEASES
Feb. 1, 2019
There are many different businesses in Missouri that provide a number of different services and products. Some of them are small and some of them are very large. While some are able to operate out of their homes, most businesses have office space or rent spaces for retail. When these companies rent spaces they usually enter into commercial leases with the owner of the building. The provisions in these leases can vary greatly depending on the needs of the business, location and many other factors.
For instance when store owners rent retail space in a shopping mall, one provision that can be a major part of the lease negotiation is co-tenancy provisions. These provisions essentially state that the tenant may have different rent obligations depending on how full the mall is with tenants. Another aspect that is negotiated is that the tenant may want their rent obligation tied to whether certain key tenants are in the mall. Generally these are major retailers with anchor stores that bring shoppers to the mall.
The basis behind these provisions is that for smaller retailers, their business may depend on foot traffic in the mall and if there are less tenants or a major retailer leaves there will be less shoppers overall and therefore their business will suffer. These provisions are not great for the landlords though so they will be very careful when negotiating them. Like any negotiation though there are a lot of factors that go into these negotiations and each one could be unique.
There are many retailers in malls in Missouri. It is very important that these retailers read the terms of their leases carefully and negotiate wisely prior to signing. Once the lease is signed it is much more difficult to re-negotiate so having it correct to start with is important. One of the important provisions in these leases is a co-tenancy provision and tenants need to fully understand these. Experienced attorneys understand the different aspects of lease negotiation and may be able to guide one through it.