Shopping Center Leases – Hot Topic

There is never a shortage of issues retail landlords face, especially in connection with multi-tenant shopping centers.  On January 23rd firm principal, Ken Morgan, will participate in a panel discussion of current shopping center trends and leasing issues for the New Jersey State Bar Association’s continuing legal education webcast.

The panel will address and guide attendees through components of shopping center lease agreements, medical leasing issues (including applicable federal laws and safe harbors), cannabis leasing challenges, enforcement and bankruptcy issues, buy-sell agreements and 1031 and 1033 tax deferred exchanges.  This CLE program will assist attorneys in protecting the best interests of their owner, developer, landlord and tenant clients.

One relatively recent trend is the increased installation of solar panels on roofs and parking areas of shopping centers.  Such installations raise a number of issues with respect to existing and future leases.  Here are a few of the key pointers for landlords that Ken will discuss:

For solar panels built in parking areas:

• Ensure there will be no reduction in the number of parking spaces.
• If there will be a reduction, be careful of minimum parking requirements:
  • set by ordinance, which could require variances in connection with future leases;
  • provided in existing land use approvals;
  • set forth in existing leases (i.e. “material reduction in parking”, “minimum number of spots per 1,000 square feet” or “Landlord shall not change in a material adverse manner the Tenant’s parking area”); and
  • any representations or warranties regarding the shopping center layout or parking.
• Avoid a “No-Build” area in future leases where a tenant’s approval will be required (or carveout solar installation rights) and, to the extent such rights already exist in signed leases, remember to obtain such approvals in advance.
• If applying to the State for credits or other financial incentives, it may be helpful to hire a consultant to help navigate the very time-consuming planning and approval process.

For aging roof-installed solar panels:

• Confirm current and future leases will allow pass throughs of such replacement expenses to tenants. If there is no clear and express language, check if more general language will allow such pass throughs (i.e. “the cost of all alterations, repairs, replacement and/or improvements” or “installation of energy conservation or other capital improvements” or “for the purpose of reducing or stabilizing Operating Expenses”).
• Incorporate specific language in future leases allowing pass throughs of these expenses.
• Review current leases to see if there are any work or noise restrictions.
• Review roof and roof membrane warranties to avoid inadvertently voiding them.

With the evolving laws and trends around these and other commercial real estate matters, consulting with a firm concentrating in transactional real estate, including leasing, is a good first step to ensure your interests are best served and protected.