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LEASE LANGUAGE: Carts, kiosks & compromises

In situations where retailers are becoming more selective, lessors are challenged with maintaining rents, and retail landlords have to be creative and resourceful in order to maintain and increase revenues.

One way to achieve this is to create more revenue-generating areas of the shopping center, without incurring excessive cost and without sacrificing the synergistic mix and quality of the shopping center. The leasing of common area kiosks and carts is a good solution.

Common area kiosks are small semi-structural transportable selling facilities that can be constructed within the common areas of most shopping centers. Common area carts are usually much smaller, non-structural and easier to relocate. These and other similar portable selling facilities can easily be located in the common areas of most shopping centers. However, they are more prevalent in enclosed regional malls and other regional shopping centers.

Landlords often lease these facilities to operators, selling smaller, easy to carry items and food not requiring significant preparation. Quite often, new items are tested in a cart program and are referred to as “incubator” tenants. If the test leases are successful, they often become in-line tenants.

Leases and license agreements for such facilities can provide for short or month-to-month terms (particularly for carts) or lengthier terms, similar to those provided to the tenants of in-line spaces. Rents and fees can span the spectrum, depending upon the demand for such locations in a particular shopping center and the popularity of the center itself.

Before embarking on a kiosk and/or cart program, the landlord should confirm that the location of these facilities in the common areas is permitted under existing leases affecting the center. Many standard form in-line leases for regional mall premises are drafted broadly enough to permit such uses. They state the landlord may utilize the shopping center or common areas for promotional, commercial and other purposes in the landlord's reasonable discretion.

Landlords planning on pursuing cart and kiosk leases should review existing leases to be sure the language is included. It would be advisable for future leases to specifically provide for the landlord's use of the common areas to locate commercial kiosks, carts and similar facilities.

From the in-line tenant's perspective, it is important to limit the landlord's use of kiosks, carts and such in common areas if they are going to interfere with or otherwise disrupt business.

One way for the in-line tenant to protect himself is to negotiate for language in the lease which provides the landlord will not locate any such facility within a mutually agreed zone or within a certain number of feet measured from the in-line tenant's store front. This should be reflected on an exhibit to the lease.

When representing the landlord, it is important while negotiating such compromises to limit any restricted space to the areas located between the lease lines of the premises; to guarantee existing structures, and that replacements of these will, at all times, be permitted.

The extent of a kiosk/cart restriction area is generally a function of the leverage between the parties in the particular transaction. However, there is usually sufficient room and compromise to allow landlords to enjoy the benefits of leasing portions of the common areas, without unduly interfering with existing tenants.

With carefully crafted leases and compromising lease language on the part of the tenant and landlord, common area kiosks and carts can contribute to maintaining and increasing revenues.

Candace Rice is senior vice president of leasing & merchandising at Newport Beach, Calif.-based Donahue Schriber, which specializes in the development, management and leasing of neighborhood, community and regional shopping centers.

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