OUT OF SITE...OUT OF MIND

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This Bulletin presents information on legal matters of general interest and in summary form. It should not be construed as legal advice or opinion on specific matters. If you would like further information about leasing issues please contact Abe J. Schear at 404-873-8752.

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Recently, I was asked an intriguing question, one which truly made me ponder (as opposed to blurting out my first stray thought). "What is the first thing one should look at when negotiating a retail lease?" After some reflection, I believe my answer is that the place to begin is with the site plan. This solution came to me having recently concluded a lease in a single anchored, "L-shaped" family center, one in which my tenant/client was taking the soon-to-be built end space nearest the street. The landlord was likely going to be agreeable to most reasonable comments, however, the trick was to identify the most relevant and deal specific issues, ones which are not routinely addressed by the standard lease form. Below, in no particular order of importance, is a list of issues raised by my site plan review:

• Outparcels. In front of "my" space, there are two parcels listed, the first as "Out" and the second as "Outparcel 2". It is important to determine what is on these parcels, whether they are owned by the same landlord, if there are reciprocal easements from and through all of the properties, whether there are height restrictions on the outparcels and whether any of the charges associated with the other parcels (i.e. CAM, taxes, insurance) will be picked up by the remainder of the center. The issue of what "use" was on the outparcel was particularly important given the sensitivity of my client to competition.
• Signage. Given that my tenant/client was going to occupy the end space, what signage rights did tenant want and what would the landlord allow? Did we want one storefront sign or two ? Did we want there to be a sign on the rear of the building, a side which was visible from the street?

Equally important, the site plan notes two (2) pylons. Would we be on either of those signs? If not at the commencement of our lease, could we be a replacement? Were either of the pylons to include an electronic message which could, from time to time, include our advertising?

• Condition of the Property. The site plan indicates that we were to be in "Phase II", however, nowhere did the site plan indicate whether the parking shown was already in place or, for that matter, what existed between my space and the street. Despite their aesthetic appeal, I do not want beautiful, fast growing flowery trees in front of my space, ones which beautify the center while wholly blocking the consumer’s view of my premises. I do not want to have to advise my tenant in the future whether "self help" includes necessary pruning.
• Condition of Adjacent Space. It was not clear from the site plan whether the construction of an additional contiguous building was a possibility. Normally passive issues, such as excavation and landlord entry, obviously would be of greater concern if such expansion was contemplated, as my exterior wall could at some point become a common wall. This possibility needed to be addressed. As a corollary, in the event of additional construction, the lease needed to address where the construction trailer(s), equipment and supplies would be located. Surely, not in front of my space.

When it was determined that additional space could and might be added, my client became interested in (and ultimately obtained) a right of first refusal upon the potentially contiguous space, thus assuring the opportunity to expand should conditions so warrant.

• Ingress/Egress. The site plan notes three (3) curb cuts on my side of the property. Did they in fact exist and was there any likelihood of closure, through eminent domain or otherwise? Again, given the problem(s) previously discussed with the Outparcels, access to the Premises is critical and certain minimum assurance would be needed in the lease.
• Adjacencies. The site plan, drawn in a rough form, noted various tenants in different spaces in the center. Was the site plan accurate? Did the relatively modest retailer adjacent to my space still remain in occupancy? What were the remaining terms of the adjacent tenant leases and, more importantly, was adjacent space used as a restaurant? A use of that type not only will have a material impact on parking during its peak hours, but may give rise to trash, odor and noise issues. Although the landlord is not likely to give me much control over the identity of future tenants (i.e. those found to fill vacancies), I can minimize my risks by at least knowing who my initial "neighbors" will "likely" be and making sure our uses are compatible.

A small point, but one of convenience: the site plan did not denote where the garbage containers would be spotted. This information would have been helpful. The above examples are hardly exhaustive of the issues which might be raised by a site plan review. If, for instance, the tenant was immediately adjacent to a supermarket or other anchor, it would be important to focus on issues related to the landlord’s right to relocate the tenant, given the likelihood that the anchor may one day want to expand, forcing the landlord to relocate any store within the current (or future) configuration of the center. It is hard enough to draft a good lease, but even more difficult when the reader assumes that the space is like every other, failing to focus upon the deal specific, salient issues and, ultimately, ignoring issues which could in fact have severe negative consequences. The "site plan" provides the reader with a wealth of information. I would recommend that it be reviewed and needed additional information gathered before reading the lease.

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