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The Effect of On-line Shopping on Retail Leases and Percentage Rent

  
  
  
Percentage Rent and Retail Leases

Written by: Geoffrey H. Smith

“Percentage Rent” is a familiar concept to retailers and landlords and has long formed a significant aspect of the business arrangement between commercial landlords and their retail tenants.  In a lease arrangement that includes percentage rent, a landlord may negotiate a relatively reduced base rent for the chance to have some “skin in the game” by agreeing to participate in a percentage of tenant’s revenue, through gross sales, when that revenue exceeds a certain threshold amount.  Tenants appreciate this arrangement because they pay percentage rent if they are doing well and their sales exceed that negotiated threshold level. Landlords appreciate this model because it compensates them for the costs they incur in creating and maintaining successful shopping centers with amenities, such as food courts and open spaces.  If a successful shopping center drives foot traffic to individual tenants that increases their sales, tenants are often willing to compensate landlords for their part in driving that foot traffic.  The concept really is a “rising tide lifts all boats” model, in which landlords and tenants work as partners. 

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Five Key Issues for the Parties to a Sublease

  
  
  
Ed Bloom bio

Written by: Edward M. Bloom

A sublease is a transfer of less than a tenant’s full interest in its lease because either it is a transfer of less than all of the tenant’s premises or a transfer of the entire premises for less than the entire term of the tenant’s lease.  Generally, there is no relationship or enforceable rights between the prime landlord and the subtenant because the sublease is basically a lease between the prime tenant and the subtenant whose terms are defined by the provisions of the sublease.  As a result of the legal principles governing (i) the existing lease between prime landlord and prime tenant and (ii) the sublease arrangement between the prime tenant and its subtenant, each party must focus on certain key issues for its protection.

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Heating, Ventilation and Air Conditioning (“HVAC”), Solar and Other “Green” Heating Alternatives in Retail Leasing

  
  
  
HVAC for Retail Leases

Written by: Gary D. Buchman

A topic that arises in virtually every retail lease, and yet is barely addressed in the letter of intent (LOI), is the heating and cooling of the demised premises.  The LOI is typically cursory:  “Landlord shall deliver the demised premises to tenant with a 15 TON HVAC system in good working order.”  Who is responsible to maintain and repair the system?  Whose obligation is it to replace the system if it can no longer be repaired?  While these are all business issues, they are most often left for the lawyers to determine during the lease negotiation.  A standard landlord clause would provide:

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Broker Awarded Fees Where Lease Was Not Signed

  
  
  
signatureWritten by: Joshua M. Alper

A judge of the Superior Court has recently awarded brokerage fees to a realtor despite that the landlord did not enter into a commercial lease with the tenant for which the realtor was compensated.  Finding that landlord had acted in bad faith, the Court distinguished the Supreme Judicial Court’s 1975 landmark decision in Tristram’s Landing, Inc. v. Wait, which established the general rule that in order to earn a commission, a broker must not only obtain a ready, willing, and able tenant, but that a transaction must actually be signed.  The Court found that the defendant landlord had encouraged the agent to market vacant space to medical groups, knowing that for business reasons an existing supermarket tenant of adjacent space objected to medical tenants.  When the plaintiff real estate agent brought a dental practice to rent the space, the defendant landlord used the threat of a dental practice as a stalking horse to persuade its existing supermarket tenant to expand into the premises at twice the rent which the dental practice would pay.

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Key Ingredients in Restaurant Leases

  
  
  
restaurant

Written by: Jane Errico

Developers of life style centers want to offer their customers an enticing selection of restaurants to draw in customers and promote restaurant and retail sales in their center.  Tenants want flexibility to change their menus and protection against other tenants directly competing with their restaurant.  Restaurant lease negotiations involve a delicate balancing of each party’s goals, which requires particular attention to the permitted use and exclusive use provisions.

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Letters of Credit versus Cash Security Deposits

  
  
  
Security deposit v. letters of credit

Written by: Gary D. Buchman

Commercial Tenants often request that Landlords accept a Letter of Credit in lieu of a cash security deposit.  This blog examines the benefits and burdens of each from both the commercial Landlord and Tenant perspectives.

Cash Security Deposit:

First of all this represents cash out of Tenant’s pocket.  Generally a cash security deposit is mingled with Landlord’s funds.  Tenant’s security may be subject to the financial soundness of Landlord and the bank in which Landlord deposits its funds.

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Negotiating Inclusions and Exclusions from Operating Expenses or Common Area Maintenance (CAM) Costs

  
  
  
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Maximizing Percentage Rent: Pointers for Landlords

  
  
  
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Due Diligence - What commercial real estate lenders need to know when reviewing leases that affect their collateral

  
  
  
reviewing commerical leases

Written By: Geoffrey Smith

While larger lending institutions may have experience with sophisticated commercial real estate loan transactions, community or regional lenders often do not and may not be aware of the many pitfalls that can arise from commercial leases which often form a significant portion of a lender’s collateral package.


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5 Elements to Include in Collateral Assignment of Lease/Landlord's Waiver

  
  
  
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