Supplemental Conditions

The Death of Retail and Legal Issues

Posted in Construction Law

The National Review recently published an article about the wide ranging economic and social impacts of the death of traditional mid-market shopping malls.  The article is not overtly political and at time waxes nostalgic about the prototypical 1980’s shopping mall.  However, the article highlights real problems facing the owners of these malls and other traditional shopping centers.

As expected, the economic issues have spurred legal and litigation issues for landlords. One of the issues I have been dealing with is what are a big box tenant’s obligations after a lease expires.  Many of the big box tenants that are now vacating malls and shopping centers have been long term tenants.  Sometimes, their leases go back decades.  In the meantime, the mall may have changed hands.  The original lease signed with a second or third removed owner and no doubt amended several times might be long forgotten.

It is worth remembering those leases and spending the time and money to located them because certain provisions in the lease could save the already struggling landlord hundreds of thousands of dollars.  Most commercial leases contain some sort of provision requiring the vacating tenant to return the space to the landlord in substantially the same condition they received it.   Long time large retail tenants have probably made several different alterations to the store.  They may also have added adjacent space.  Eager for increased revenue the retail tenant may not have paid much attention to what would happen if they needed to vacate the space.  This presents an opportunity for landlords, who can demand that the tenant pay for returning the space to its original condition.

Another issue that I have seen are environmental issues.  At one point, automotive centers were common additions to big box retail.  These were largely discontinued in the mid to late 80’s.  If there were automotive centers at the property, there was likely an underground storage tank for waste oil and other fluids.  That tank should have been properly been removed before the center was discontinued.  That removal should have been documented.  Because the current property owner is removed from the owner of the property at the time the center operated, the new owner may have no idea that the automotive center even existed.  Here again it is worth doing your research before shaking hands with a long term vacating tenant.