Malls · Retail leases · Shopping Center · Uncategorized

So a cow walks up to a drive thru… Operating hours and liquidated damages

IMG_0967

This week’s (and next’s) post will be a bit shorter as I am in India with my son. This picture reminded me of Chick-fil-a which reminded me of a clause I ran across earlier in the week.

Most retail leases have operating hours requirements which provide for default if the tenant does not maintain the required hours. However, some leases have liquidated damages specifically identifying a penalty to be applied if the tenant fails to operate all hours and days. The liquidated damages can often run in to 100% of the daily rent for failure to operate – so the tenant has paid rent, but then there is a 100% penalty agreed to in advance because the tenant’s failure to operate affects the landlord and the other tenants in the property.

Therefore, sophisticated tenants will specifically address not opening on Sundays, or not opening on weekends, or not opening certain months of the year (think tax preparers in the off season or my favorite purveyors of water ice (a Philly thing) during the winter or even the ability to close once or twice a year for inventory.

If you are a tenant, don’t just hope the landlord doesn’t bill you for liquidated damages – negotiate. And, if you are a landlord, put some teeth in your operating hour requirements.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s