Current Issues in Retail Leasing Update
This morning I attended a breakfast seminar sponsored by the Atlanta Bar Association entitled "Leasing Issues in Today's Economy." The panelists were three prominent Atlanta leasing attorneys: Jonathan Neville of Arnall Golden Gregory, Robert Stanley of Stanley, Esrey & Buckley, and David Kitchens of Kitchens Kelly Gaynes.
The discussion centered on current issues in retail leasing. The panelists did an excellent job of highlighting issues from both the landlord and tenant perspective.
Here are some of the takeaway bullet points from this informative seminar:
- For a tenant seeking rent relief in this market, short-term relief is often a more viable option. Longer term rent relief is less palatable to the LL due to the detrimental effect it has on the shopping center's value.
- A tenant seeking rent relief should be current on its rent when approaching the LL. Many institutional LLs have a policy against negotiating with tenants who are behind on rent.
- Tenant improvement allowances are a hot topic in lease negotiations. Because so many LLs are struggling, the tenant must protect itself from a LL who is unable make a TI payment. The tenant should insist on either having the TI dollars escrowed with a third party and/or the right to offset unpaid TI from future rent payments.
- Co-tenancy clauses continue to be a point of contention in negotiations and are frequently being litigated. (See my recent post on this topic.)
- Due to the increasing number of foreclosures, it is more important than ever for tenants (even smaller tenants) to insist on a subordination, non disturbance and attornment agreement (SNDA) with the LL's lender. This will protect the tenant's rights under the lease in the event the lender becomes the owner through foreclosure.
The current economic climate continues to drive lease negotiations in many ways. Not only is the leverage shifting in favor of creditworthy tenants, but certain issues have become increasingly important as both landlords and many tenants continue to struggle financially.
