Signing a lease for premises in a shopping centre is different to other kinds of commercial leases. Be very careful before stepping into treacherous terrain. Here are a few features that are found in shopping centre leases that do not exist anywhere else:
Turnover rent – this is in addition to your regular rent. It is literally a percentage of your revenue (not profit). It’s just like paying a tax to our landlord and as you earn more, it keeps increasing.
Promotion Fund Contribution: Tenants are required to contribute to a promotion or marketing fund used for advertising and promoting the shopping centre (but not the tenants business).
Fit-Out Requirements: Detailed specifications for the fit-out of the leased premises. This may include a requirement to use the landlord’s architects or tradesmen.
Trading Hours: mandatory trading hours that tenants must adhere to, which are often longer than standard retail hours. Failure to do that (to remain open) is a breach of the lease that may trigger financial penalties.
If it seems like the foregoing suits the landlord at the expense of the tenant, you are right. All reasons to avoid setting up a business in a shopping centre wherever possible. If you must, consider asking for some of the worse ones to be removed.
Many will be non-negotiable, but an expert leasing lawyer will know which can be negotiated out and which the landlord is likely to dig their heels in on. Consider also adding a few new clauses to benefit you as the tenant
