Very commonly, retail leases require that the tenants provide sales reports even if they are not required to pay non-percentage rent tenants. Non-percentage rent means the traditional $15 per square foot without any percentage of gross sales.

Unfortunately, more often than not, when tenants push back on this reporting requirement in this scenario, landlords will waive the reporting requirements. But they really shouldn't, particularly as market conditions tighten for retailers.

The landlord needs to enforce the reporting requirement because it can help the landlord anticipate and get ahead of problems like tenant cash flow issues, etc. In this way, a landlord can work with tenants before they go dark.

An example is entering into a remarketing agreement with a tenant to allow them to find a new tenant before they fail and abandon the premises. It is also important for landlords to keep rental statistics.

Finally, landlords should enforce radius restrictions on self-competition. In recent times, landlords have relaxed enforcement on radius restrictions. But they need to be more proactive and insist that they be included in leases—and enforced. An example of a problem that could result if the landlord waives or fails to include radius restrictions, is that a tenant that has another store nearby with better sales may elect to let the less productive store go dark.

GlobeSt.com: What can be done to help improve the retail market and turn it around?

Steinman and Grunspan: Time usually takes care of everything. Cycles come and go. Lenders and borrowers will always be there. It remains to be seen whether past customer shopping patterns will return or if we have a “new normal” with permanent lower demand.

As discussed above, centers may be repositioned to other uses such as residential because they are generally well located. In addition, it may become a trend for retailers to open smaller spaces that serve as showrooms so shoppers can touch, feel, and try on merchandise before they purchase online. Additional storage space for products will be unnecessary at these locations, as the products can be stored and shipped to customers from offsite warehouses.

Carlton Fields |

MIAMI—With foreclosures rearing their ugly head in the shopping center market, attorneys are offering strategic advice to landlords looking to navigate the landscape. What provisions do retail real estate owners need to press for? Can the retail market turn around?

GlobeSt.com caught up with Jay Steinman and Alan Grunspan, both shareholders in Carlton Fields' Miami office, to get some insights in part two of this exclusive interview. You can still read part one: Why Shopping Centers Are Facing Disturbing Financial Challenges.

GlobeSt.com: What contract provisions should landlords enforce to ensure that their shopping centers remain viable?

Steinman and Grunspan: Financial disclosures and financial covenant requirements should be closely followed. If there is a waiver, it should be clearly spelled out in terms of type, kind, and duration.

Very commonly, retail leases require that the tenants provide sales reports even if they are not required to pay non-percentage rent tenants. Non-percentage rent means the traditional $15 per square foot without any percentage of gross sales.

Unfortunately, more often than not, when tenants push back on this reporting requirement in this scenario, landlords will waive the reporting requirements. But they really shouldn't, particularly as market conditions tighten for retailers.

The landlord needs to enforce the reporting requirement because it can help the landlord anticipate and get ahead of problems like tenant cash flow issues, etc. In this way, a landlord can work with tenants before they go dark.

An example is entering into a remarketing agreement with a tenant to allow them to find a new tenant before they fail and abandon the premises. It is also important for landlords to keep rental statistics.

Finally, landlords should enforce radius restrictions on self-competition. In recent times, landlords have relaxed enforcement on radius restrictions. But they need to be more proactive and insist that they be included in leases—and enforced. An example of a problem that could result if the landlord waives or fails to include radius restrictions, is that a tenant that has another store nearby with better sales may elect to let the less productive store go dark.