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Choosing your words carefully in retail leases.


A lack of precision in drafting retail leases can cause significant problems for owners and tenants alike. Confusion and unnecessary litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute.

When a person begins a civil lawsuit, the person enters into a process called litigation.
 can result if those representing the interests of owners and the tenants are not highly specific when drafting retail leases in general and "use clauses" in particular.

From an owner's perspective, the proper wording for a use clause in a retail lease is critically important. Phrases and words that do not have a precise, inherent meaning, and therefore are open to interpretation, are a common trap. A "deli" is a perfect example. One person's "deli" is another's "restaurant." What exactly is a deli, and what does it sell? Does it have cooking facilities? Is there seating? Table service? The truth is, the word "deli" alone is too broad for effective, descriptive use in a lease, and can create difficulty for owners and tenants in determining the scope of products or services a tenant can offer at the premises.

When food is involved, it is especially important to specify whether there will be on-site food preparation and on-site consumption. If this issue is left silent in a retail lease, the owner faces unanticipated complaints and liabilities from resulting smoke, grease grease, mixture of lubricant and thickener. It is used to reduce friction between surfaces from which oils would leak away or cause damage by dripping, or where lubrication must be assured for extended periods. Many greases are mixtures of mineral oil and soap. , rubbish, and fire department, building department and health department regulations and issues.

Suppose that a deli begins offering pizza although there is a pizzeria tenant in the same building? At the outset, this may challenge the viability of the pizzeria tenant, an unintended result of the owner's leasing efforts. Where landlord and tenant see a mutual gain, carefully drafted restrictive covenants Restrictive covenants

Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividends.
 control uses, preventing unintended competition among tenants. This, in turn, maintains peace, helps prevent litigation and the attendant expense, and helps ensure that the viability of one tenant will not challenge that of another.

Another frequently used phrase that often causes difficulties, particularly for owners, is "related" or "accessory" use. In one recent instance, a gourmet chocolatier choc·o·la·tier  
n.
1. One who makes or sells chocolate.

2. A place where chocolate is made or sold.



[French, from chocolat, chocolate, from Spanish chocolate
 in a building wanted to sell what it viewed as "complementary" items. What is complementary or accessory to chocolate? What would be the outer boundaries of those items deemed "related" to chocolate? This is not a problem until the "related," "accessory" or "complementary" products begin to compete with another tenant, or expand into an area that is undesirable to the owner, or that discourages potential tenants that do not compete with the chocolatier, but for the expanded use. From a tenant's perspective, the best security is to require a restrictive covenant restrictive covenant

In property law, an agreement acknowledged in a deed or lease that restricts the free use or occupancy of property, such as by forbidding commercial use or certain types of structures.
 from the owner that prohibits the owner from leasing space to a potentially competing tenant.

Another frequent, but problematic, phrase in a retail lease is products of a "first-class nature." But what do the phrases "first class" and "luxury goods" mean? They mean different things to different people. While phrases such as "first-class," "premium," "luxury" or "high end" are used frequently for lack of a more concise phrase, additional illustrative il·lus·tra·tive  
adj.
Acting or serving as an illustration.



il·lustra·tive·ly adv.

Adj. 1.
 language in support of those phrases more fully portrays the intentions of the parties and helps to prevent ambiguities when construing the lease in case of a dispute.

While precision in drafting use clauses is of particular importance to owners, they also may need to have some flexibility in that regard.

Tenants require an exit strategy if their business does not perform. If this happens, some tenants may seek to redirect re·di·rect  
tr.v. re·di·rect·ed, re·di·rect·ing, re·di·rects
To change the direction or course of.

n.
A redirect examination.



re
 the retail effort. The most simple and direct way for a tenant to protect itself is to secure the right to sublet sub·let  
tr.v. sub·let, sub·let·ting, sub·lets
1. To rent (property one holds by lease) to another.

2. To subcontract (work).

n.
 the space or assign the lease if the concept fails, without limiting the potential sublet or assignment uses to only those particular concepts previously attempted by the tenant.

While the assignment or subletting The leasing of part or all of the property held by a tenant, as opposed to a landlord, during a portion of his or her unexpired balance of the term of occupancy.

A landlord may prohibit a tenant from subletting the leased premises without the land-lord's permission by
 is usually subject to the owner's approval, customarily that approval cannot be unreasonably withheld.

While the tenant should seek the right to sublet or assign for the broadest possible use (e.g., any lawful Licit; legally warranted or authorized.

The terms lawful and legal differ in that the former contemplates the substance of law, whereas the latter alludes to the form of law. A lawful act is authorized, sanctioned, or not forbidden by law.
 use), the owner should carefully consider those uses it would not permit at the premises, and those uses that might potentially compete with other tenants at the building or with the leasing of other available space at the building.

Owners and tenants can minimize the possibility of expensive litigation by ensuring upfront that the language inserted into leases explains exactly how tenants can use their space, what types of goods can be sold from their space and what methods of operation are permitted.

By working together, tenants can achieve the flexibility to achieve success and owners can help ensure the success of their projects by managing the various tenancies to facilitate the success of all tenants at the expense of none.

ROBERT CYRULI

CYRULI SHANKS
For other meanings, see Shanks (disambiguation)


The shanks and tattlers are wading bird species in a number of genera characterised by a medium length bill and long, often brightly coloured legs.
 & ZIZMOR LLP LLP - Lower Layer Protocol  
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Title Annotation:INSIDERS OUTLOOK
Author:Cyruli, Robert
Publication:Real Estate Weekly
Date:Oct 12, 2005
Words:766
Previous Article:Challenge of the unexpected during construction.(INSIDERS OUTLOOK)
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