Lease Negotiators Need To Be Agents Of Reality And Counselors, Not Just Gladiators

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A good friend of Ruminations contacted us to discuss the kinds of provisions one might include in a retailer’s lease when the floor above it houses a residential apartment. We’re not going to share the “fruits” of that discussion today, but for one. And that one is: “Lease provisions won’t paper over the most common problems.”

The most common problem is related to the reality of the situation. A residential tenant needs more protection from the activities related to a retailer than does the retailer need from the apartment dweller. What is more, just because the retailer may be well within its lease rights to do whatever annoying thing it might be doing, that’s no insulation from continuous complaining by the residential tenant.

Before anyone clicks away from today’s blog posting thinking the relevance of where Ruminations seems to be going doesn’t seem promising, let us stop you there. The discussion we hope to trigger in today’s posting is not limited to a retail-residential mix-up. It could be a retail-office mix and could even be a retail use-retail use situation.

Those who negotiate leases for tenants are certainly obligated to make the tenant’s interests paramount ones. Basically, to the limits of the tenant’s bargaining power in the context of the overall leasing environment that particular day, a tenant’s lease negotiator will seek to minimize restrictions on the tenant’s operation and maximize the tenant’s flexibility. That, however, is far from their complete assignment. Anyone negotiating on behalf of a tenant (or a landlord), whether the negotiator be an outside person such as an attorney or a broker, or whether that negotiator be an employee of the leasing party, needs to fulfill two other roles. Those are: (a) being an agent of reality; and (b) being a counselor. Today’s posting will elaborate on those roles.

Imagine there were no restraints on a tenant’s use of its property beyond what the law will permit. That would let the tenant blast its 30 television screens at the highest volume the equipment allows. Imagine a restaurant venting its finest cooking odors out the rear of the building. That’s also where it keeps its wet waste in standard loose-lid trash cans. Its other waste is placed in front of the restaurant every night at closing for pickup at 11 a.m., a full half hour before it reopens for lunch. It parks its delivery vehicles in the parking spaces in front of an adjacent tenant’s store (so as to be close to the restaurant, but not block the spots directly in front of its own space). We could go on, but you see that its lease negotiator got a pretty good deal for that tenant.

Now suppose your “tenant” is not the restaurant, but the one right next door. Different story, huh? What does that neighboring tenant’s lease say, especially when there wasn’t even a thought of a sports bar/restaurant being next door when its lease was negotiated?

One reader or another will protest that nobody’s lease would affirmatively allow those annoyances to exist and that no landlord would give permission in the lease to such practices. True, but that’s not a workable solution. In reality, leases don’t often include a detailed list of “neighborly rules.” Certainly, one or more of the examples listed above have been, and sometime regularly are, the subject matter of specific lease provisions, but rarely are all of those examples covered and there are tons of additional examples that could be given.

We’re prepared to be told that there are a lot of “standard” lease provisions to cover restaurant uses. That’s true, but we reiterate in this polemic way: for every item covered by a rule, there are two uncovered items lurking in the dark. Add to that our earlier premise, that a tenant’s lease negotiator works very hard to reduce and eliminate restrictions, and readers will have to agree that the terms of a lease won’t cover every possible annoyance. In addition, lease provisions are not self-enforcing. And, annoyance is in the eyes (ears, and nose) of the beholder.

The discussion we want to trigger today is NOT, however, about what a tenant can include in its lease to protect itself against annoyances. It ISN’T about what a landlord should seek to include in a lease to regulate this kind of behavior. It IS about certain tenants recognizing that the nature of their business, or the way they conduct business in their premises, could be annoying to a reasonable, neighboring tenant, and what that realization implies.

We’ve given some restaurant examples because restaurants are universally recognized to create unique situations (problems?). There are other kinds of businesses where “situations” aren’t that obvious. For example, we are aware of a fitness club tenant who was asked by its lease negotiator if any “unique” or unusual issues ever arose in its existing leased situations. [That’s always a good question to ask someone whose business you don’t know that well – it is part of the “counseling” role.] The response was: “We have an neighboring retailer who is always complaining about the building shaking when our customers drop weights onto the floor. Make sure there is nothing in our lease that would keep us from letting our customers drop weights.”

That’s our opening for today’s point.

Lease negotiators need to tell their clients or employers that just because the lease allows them to drop 150 pound barbells from a height of four feet doesn’t mean they are going to be insulated from constant complaining from neighboring tenants. Some of those tenants may have the right to blast their 30 television sets or place their wet waste at the curb in front of the fitness club’s doors. You’ve got to tell those clients or employers that the lease won’t paper over the problem. You’ve got to tell them that if you know that your operation is going to unreasonably disturb a reasonable neighbor, commercial or residential, it has to design a solution – in our example, prepare a shock absorbing floor. If a tenant is going to play load music, it has to prepare its walls and the plenums so that the sound doesn’t travel next door.

Those are example of what Ruminations means when it writes that lease negotiators also need to: (a) be an agent of reality to their clients or employers; and (b) be a counselor to them as well.  The best ones are, and, this isn’t limited to “being neighborly items.”

Having had no intention to list a slew of common problems and then list common, corresponding solutions, we’ll conclude today by wishing all early readers an enjoyable remainder of this holiday weekend.

[After we wrote this week’s posting, we saw this tidbit on the Legal Rebels blog (by Paul Lippe and Jeremy Paul). Paul Lippe reported that, at Richard Susskind’s recent conference in Scotland on the future in law, Susskind said “Most clients would rather have a guardrail at the top of the hill rather than an ambulance at the bottom.” Wish we had seen that first, it would have saved readers a lot of reading today.]

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Comments

  1. Very timely article. I am negotiating this week with a first floor retailer who has LOUD music in their store, and we are concerned about the residential tenants on the floor above. Planning on a sound test in the space later in the week to see what it is like above.

  2. Nancy N. Grekin says:

    Been there. Done this. It is a very very difficult issue to deal with. Had a tenant client operating a bar in a hotel lobby space. The landlord wanted the bar and recruited the tenant. Tenant installed significant leasehold improvements. The tenant was to have operated a restaurant but when the building was built out they put in pipes which lowered the ceiling which precluded a vent so he couldn’t cook. That meant he operated only as a bar with simple food and had to stay open until 4 AM and play music to attract a crowd.The lease acknowledged that there be music in the bar and in fact required it.

    Guests in the hotel were complaining about the noise. We were sure it was being carried in the pipes the landlord installed which precluded the kitchen. Oh the irony. Landlord starting complaining, telling tenant he had to close earlier and prevent the noise. He installed considerable noise equipment but it still carried to the rooms probably in the @#$%^& pipes 🙂 We negotiated and negotiated and held them off for some time. But eventually the landlord succeeded in evicting my client due to breach of provisions which prohibited noise and disturbances which bothered other tenants. In this case, a very general provision benefiting the landlord worked. Perfectly.

  3. What about the other way residential above and retail on the ground the number one concern I would have is Leaks and damages caused by leaks. In almost all apartment you have lines of pipe that go to the top and end in the basement. Water lines sewer lines etc. Gas lines. Imagine one tenant on top floor is gone on vacation and they had a water pipe burst and it takes a while to go floor to floor but when it does there is no stopping gravity. You are a dry good apparel and you hot your best new seasonal shipment and have ran a promotion for the labor day sale and you cone in in the morning. And your missing apart of your ceiling because it caved in around 3 in the morning. You put the double bat insulation in your walls and ceiling for sound attenuation and all that water has nob wicked up and all of your wall and ceilings need to come down.

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