Reap Rewards of Seasonal Pop-Ups Without the Risks

It seems like with each passing year, there has been an increase in national-brand “pop-up” shops appearing in shopping centers for the holiday season. Pop-up shops can be a great way to add pizzazz to your center, but they do pose some risks if you don’t understand the differences between these temporary tenants and long-term tenants, and prepare for them. Here are the top risks that you might run into—and how you can protect yourself against them.

Risk #1: Inadequate security deposit. You may be tempted to waive the security deposit requirement for a pop-up tenant, but don't. Collect at least two months' rent from a pop-up tenant. Pop-up tenants that are not part of a lucrative national chain could have fewer assets than your other tenants. If the pop-up tenant defaults under the lease or doesn't pay its rent, the security deposit gives you protection. Additionally, require the pop-up tenant to restore the security deposit to its original amount if you must use the security deposit to cure—that is, fix—a default.

Risk #2: Ambiguous permitted uses. Make sure the use clause in the pop-up tenant's lease is very specific. Spell out the items the tenant can sell. Allowing it to stray could create unfair competition for your permanent tenants. To do this, ask your attorney about using this type of Model Lease Language:

Model Lease Language

Tenant shall use the Premises for the display and retail sale of [insert merchandise] and for no other purpose.

Risk #3: Hours of operations. Require the pop-up tenant to be open and continuously operate during the center's business hours—even if you extend the business hours on particularly busy days. A pop-up tenant won't bring much to your center if its space is dark at a time when the rest of your tenants are open. Pop-up tenants may balk at these requirements, but don't compromise. It's important that the tenant function during the same hours as your other shopping center tenants, especially during the busy holiday season.

When drafting leases with all of your tenants, not just pop-up tenants, remember to include provisions that give you the right to extend mall hours during certain months when the center will have the most shoppers. You can extend mall hours for all tenants during the holiday season by setting out in your leases that shopping center hours are to be determined solely by you as the owner, and not by the tenants or by a merchant's association, and that you can alter the shopping center hours by way of a notice to all tenants. Check with your attorney before using this language:

Model Lease Language

Tenant agrees to open and continuously operate its business in the Premises during all business hours of the Shopping Center and shall conduct its business in a high class and reputable manner and in accordance with the Shopping Center Rules and Regulations set forth in Exhibit [insert #] attached hereto.

Risk #4: Parking shortage. During the holiday season center parking lots can become overcrowded and prone to accidents. And if there are no parking spaces available when a shopper is trying to park his car, he may drive to the next center to shop, causing you to lose business.

Typically, tenants' employees are permitted to park in center parking lots. But you may have to remove employee parking (or move it to the lot's least customer-convenient areas) in order to make room for the increase in customers who need parking during the holiday season.

Be prepared for pushback from tenants that are concerned that if their employees have to find alternative free parking or pay for parking elsewhere, they won't come to work in a timely manner—or at all. And pop-up shops that are selling the new “hot” item for the season may attract hordes of customers who need to park their cars in order to shop. Specifically set out in your leases where employee parking is to be situated. Specify whether and how that will change during the holiday season. Some landlords indicate a site not even on the shopping center grounds, but on property controlled by the landlord. Make sure that you include that information in the lease provisions.