Q The maintenance team at my shopping center occasionally forgets to make very minor repairs. I'm working with them to make sure that they're more diligent about these things. But in the meantime, a tenant is threatening to stop paying rent, and even terminate its lease. It says that I've breached the lease by failing to keep up the common areas as I'm required to under the lease. I've suspected that this tenant wants to move to another property because of financial difficulties.
Your lease will specify under what circumstances you and the tenant may terminate the lease. It'll also spell out the procedure you must follow to do so—for example, by giving 30, 60, or 90 days' written notice. If the provisions in your lease that govern termination rights are drafted ambiguously, you may be left with a more limited right to get out of the deal than you intended. For example, you might intend to give yourself an ongoing termination right when certain events take place, such as the tenant failing to pay common area maintenance fees.
Commercial tenants typically want the right to “go dark”—that is, stop operating while continuing to pay rent—if their businesses aren't generating enough revenue. “Going dark” can save tenants the cost of stocking and staffing the space they rent. But if you give a tenant the right to go dark, you may want to carve out a recapture right for yourself—allowing you to take back the space and replace the tenant.
On Oct. 3, 2008, President Bush signed the Emergency Economic Stabilization Act of 2008 into law. This so-called bailout package is considered a necessary evil to move our economy in the right direction, but experts warn that it's far from a quick fix and expect the turnaround to be a slow and painful process. As a result, you'll probably see a significant rise in vacancy rates and more hesitation on the part of prospective tenants that had previously been looking to sign new leases.
As finding good tenants becomes increasingly difficult, owners will want to lock down good prospects as quickly as possible. But what happens when an otherwise excellent prospective tenant wants to sign the lease, but can't commit until it knows whether its financing has been approved?Time kills deals, says New Jersey attorney Marc L. Ripp, and if you are like most owners, you want to close the deal as soon as possible. The solution: Rather than waiting to see whether the tenant will get financing, go ahead and sign the deal, but give the tenant a limited right to cancel it.
