So, after you’ve fully negotiated a Lease, do you think the words are chiseled into stone, the document is fixed, it is now a “read only” file? Maybe you need to think again. It is not uncommon (how about that for indirectness) for a lease to say: “Landlord reserves the right to, and Tenant agrees that Landlord, at any time and from time to time for the general welfare of the Shopping Center, may impose reasonable rules and regulations governing the Shopping Center and the use of the Common Areas and Tenant shall abide by those rules and regulations..” Yes, it ain’t over ‘til the fat lady sings.
Let’s talk about “Rules and Regulations.” There is nothing wrong, per se, about placing reasonable limitations on a tenant’s use of the property, including on the tenant’s own premises. After all, a lease is a grant of rights to a tenant, and no one believes those rights should be unlimited. And, most of the typical set of Rules and Regulations meet a tenant’s expectations – no smoking; rubber tired wheels on hard flooring surfaces; no shaking carpets out the window.
Ah, there’s the rub. If the rules and regulations were only those attached to the lease, and if those rules and regulations were as carefully vetted as is the lease’s rent clause, then there would be no grist for this Ruminator to work with, only chaff. But, a lot of those leases (yet, far from all) speak of rules and regulations that haven’t yet been written, let alone thought of, and they contain the “Landlord reserve the right …” text you saw above
Now, this seems like a pretty innocent lease provision if all you are thinking about is shaking out carpets or putting trash out on the sidewalks. But, what if the later-imposed “reasonable rule for the general welfare of the Shopping Center” is that employees need to park across the street? And, to add to the hypothetical, what if the lease doesn’t have an employee parking provision because you negotiated it out of the drafts?
Let’s not argue the facts. Start with the premise that the new employee parking rule is reasonable. The Shopping Center has become very popular, and customer parking is scarce. There is plenty of “less than good parking” well away from the entrances, and that’s where the landlord wants your employees and everyone else’s to park. But, that’s not where you want your employees to park. You have your own “idea” as to where you want your employees to park, and that might be right in front of your competitor’s customer entrance. That’s why you negotiated employee parking out of your own lease.
Or, the rule might really only affect you and some other tenants, but not all tenants. For example, employees of tenants occupying 5,000 or more square feet of space might be required to park in the “new” employee parking area. Here, you have no issue, per se, with making your employees park away from the prime customer spaces, and would like to see your neighbors abide by such a rule. In fact, even requiring employees of the large size premises to use the employee parking area would be a great relief for customers. But, even more important to you is your relationship with your own employees. How can you insist that your employees park far, far away from your employee entrances when your next door neighbor’s employees aren’t bound by the same rule? Or what if the landlord selectively enforces the employee parking rule against you and not others at the Shopping Center?
Now, to sum up where we are now. You’ve agreed to the concept that the Landlord (essentially) can amend the lease by unilaterally promulgating rules and regulations after the lease is signed. [Just take that as a fact, because this isn’t all that unusual.] You’ve been given the comfort that the rules and regulations will be reasonable. But, you now realize that even “reasonable” rules and regulations can adversely impact your business. How do you balance the reasonable needs of the landlord with the reasonable needs of the tenant?
Here is one approach. Here’s what the lease could say. I’ll stand behind the general principles in it, but have no problem with changing the words or expressing the concept differently.
Tenant shall comply, and shall require that its employees, agents, and contractors comply, with the Rules and Regulations with respect to the Shopping Center which are set forth in Exhibit “X.” Tenant shall use commercially reasonable efforts to have its customers comply with such Rules and Regulation while inside the Demised Premises. Landlord shall have the right to make reasonable amendments thereto from time to time for the safety, care, and cleanliness of the Shopping Center, the preservation of good order therein and the general convenience of all the tenants and beginning thirty (30) days after Tenant receives notice of such amendments or new Rules or Regulations from Landlord, Tenant shall comply with such amended Rules and Regulations. No newly promulgated Rule or Regulation and no amendments to the Rules or Regulation shall be enforceable against Tenant or Tenant’s Visitors if: (a) applying the new or amended Rule or Regulation will materially interfere with the use and enjoyment of the Shopping Center by Tenant or Tenant’s customers; (b) any such new or amended Rule and Regulations is not generally applicable to all tenants of the Shopping Center and their respective visitors; (c) any new or amended Rule or Regulation is not uniformly enforced against all tenants of the Shopping Center and their visitors; (d) application of the new or amended Rule or Regulation would increase Tenant’s cost to occupy the Demised Premises; or (e) application of the new or amended Rule or Regulation would diminish Tenant’s rights under this Lease or reduce Landlord’s obligations under this Lease. In the event there is a conflict between the provisions of this Lease (other than Exhibit “X”) and the Rules and Regulations, the provisions of this Lease shall govern. Landlord shall not be responsible for the non performance by any other tenant or occupant of the Shopping Center of any of the Rules and Regulations; however, Landlord shall use reasonable efforts to apply all Rules and Regulations uniformly to all tenants.
There are a lot of possible variations even where the general principle is agreed-upon. Such a lease provision could permit new rules or changed rules only if they have an “insignificant” effect on the tenant. It could limit the uniformity requirement to like sets of clients, such as rules for restaurants only affecting restaurants. Go ahead and try writing this kind of provision for yourself. Share your thoughts with other by posting a comment to the Ruminations Blog at www.retailrealestatelaw.com. Try it, you’ll like it.