Often, in enclosed mall settings, a tenant will want the right to perform various marketing services, including, but not limited to, handing out coupons, handing out samples of its product, distributing surveys, distributing brand name items, or having mascots or other branded costumed employees greet or talk with customers in the shopping center. These types of marketing efforts can have a beneficial effect both on the tenant’s business and upon the tenant’s ability to pay the landlord a percentage of sales from the tenant’s business operation. However, the landlord and the tenant should arrive at certain understandings concerning the business operations of the tenant in the common areas, so as to avoid situations that may affect the overall operation of the enclosed regional mall. This article will address those issues that should be addressed by the landlord and the tenant during their lease negotiation, in order to avoid unwanted circumstances at the shopping center.
- Location of Marketing Efforts. Generally, a landlord will want a tenant to maintain its marketing efforts in the common areas within a fixed number of lineal feet from the tenant’s premises. The distance will vary depending on the location of the tenant’s premises and the location of adjacent retail tenants. Also, the distance may vary based upon whether the tenant is located in a designated area (e.g., a food court, outside of a movie theater or other area designated for a certain specified type of tenant). However, in general, the landlord will want to keep the tenant’s marketing efforts to an area within ten feet (10’) to twenty-five feet (25’) from the tenant’s premises. However, the landlord and the tenant should arrive at the stated distance that will be acceptable to both the landlord and the tenant as part of their lease negotiation. Further, the landlord and the tenant should arrive at a method for monitoring the distance that the tenant’s marketing efforts are performed at the shopping center. The landlord and the tenant may want to establish a marked off area within which the tenant may perform its marketing efforts. Conversely, a landlord and a tenant may want to establish certain specified landmarks within the common areas within which the tenant’s marketing efforts must be performed.
- Impact on Other Tenants’ Businesses. Any lease agreement that addresses a tenant’s marketing efforts, should prevent the tenant from performing its marketing efforts in front of another tenant’s business or within a certain number of feet from another tenant’s business. Once again, the distance and restrictions on the tenant’s marketing efforts will be dependent upon what type of marketing efforts are being performed, in what type of area the marketing efforts are being performed, and how intrusive the tenant’s marketing efforts actually are. If a tenant is handing out coupons or surveys, that type of marketing effort may not require the same restrictions as perhaps handing out samples of a tenant’s product. However, regardless of the distance that will be imposed upon the tenant’s marketing efforts, such specifications should be included in the lease agreement and enforced by the landlord.
In addition, if the landlord does not want a tenant to engage in intrusive marketing efforts with the shopping center’s customers, like so-called “hawking” activities, such restriction should be included in the lease. Further, any marketing activities that could be considered anti-competitive (e.g., negatively advertising against another tenant at the shopping center) should also be prohibited.
- Remedies. In the event the tenant breaches the limitations imposed upon its marketing efforts, there should be established certain notice and cure periods within the lease, as well as what remedies will be available to the landlord based upon such breach. For instance, if a tenant breaches its marketing parameters, a tenant may be restricted for a certain period of time from engaging in future marketing efforts. Also, if such breaches occur several times over a period of months, a tenant may be restricted from engaging in marketing efforts in the future.
In addition, the landlord and the tenant may want to establish certain other remedies for the landlord if the tenant breaches its marketing restrictions. For instance, there may be a liquidated damage remedy which imposes a monetary fine for each violation of the tenant’s marketing restrictions [e.g., Fifty and 00/100 Dollars ($50.00)]. In contrast, a tenant may want to establish notice and cure provision before a liquidated remedy is imposed or establish a few “free” violations before the liquidated damage remedy is imposed.
- Indemnification. Since the tenant’s marketing efforts will occur within the common areas, a location that is generally insured by the landlord and also indemnified by the landlord for occurrences within such area, the landlord and the tenant may want to establish certain indemnification obligations for the tenant if the tenant or its customers cause damage or liability within the common areas. The indemnification should include injuries or liabilities caused by the tenant within the common areas based upon its marketing efforts, as well as any clean up or other repairs required to be made to the common areas based upon the tenant’s marketing efforts. The tenant should be careful to limit the indemnification to those areas that will be included within the tenant’s liability insurance policy and also within the constraints of what the tenant is willing to accept from an indemnification perspective.
By carefully outlining the restrictions that will be placed upon the tenant in performing the tenant’s marketing efforts, detailing the remedies available to the landlord if the tenant should breach those restrictions, and carefully carving out an indemnification to protect the landlord against property damage and injury created in the common areas by the tenant’s marketing efforts, the landlord and the tenant can arrive at a mutually acceptable distribution of rights and obligations as it relates to the tenant’s marketing efforts, and the tenant will be able to market its products, services and brands within the common areas of the enclosed regional mall.
American Lawyer Media, Commercial Leasing Law & Strategy Volume 24, Number 7, January, 2012