In the Spotlight: What Every Tenant Should Know About Negotiating Parking Privileges in Commercial Leases

Designated, reserved parking spaces appurtenant to office leases are highly valued by certain types of tenants, especially in the downtown, metropolitan markets. Thus, a tenant's counsel must carefully consider the parking provision when negotiating an office lease. Landlord-oriented form leases often give the landlord the right: 1) to expand or change any parking area, 2) to temporarily close off portions of the parking areas for purposes of expanding, repairing, restoring, constructing or reconstructing the parking decks, and 3) to change, from time-to-time, the rules and regulations with regard to the parking area. The tenant's counsel should always make sure that the lease properly limits these rights so that they cannot be used in a manner that will potentially, adversely affect the tenant's use of its parking rights. All new rules should be limited by a “reasonableness” qualifier, and the landlord should be required to enforce the rules and regulations in a “nondiscriminatory manner as against tenant.”

Other important considerations in office leases include: 1) what security services will be provided, 2) if the lease is in an urban area, whether there will be overflow parking, tandem parking or valet parking, 3) whether there will be designated visitor parking, and if so, the location and cost of such visitor parking, 4) whether the landlord will provide a validation procedure for the tenant to use for its guests, and 5) whether the tenant may recall any portion of the parking allocation (as discussed in Part One).

Shopping Center Leases

The availability and adequacy of parking facilities are of utmost importance in shopping center leases. The financial viability of the individual tenant's business as well as the owner or operator of the shopping center hinges on the customers' ease of parking and access to the shopping center. See Joseph v. Hustad Corp., 454 P.2d 916 (Mont. 1969) (stating that “[s]hopping centers exist because of an abundance of parking area and ease of access from and to the same … [d]eny either parking or access thereto and they cease to exist as a viable entity”). The reality of shopping center leasing, however, is that the ability and leverage of a shopping center tenant to receive favorable parking provisions will depend upon whether the tenant is an anchor tenant/national retailer or a small local tenant.

A shopping center tenant should be concerned about: 1) no-build zones in parking areas, 2) the traffic flow to and from the parking area and within the parking area, 3) prohibiting the landlord from leasing to any future tenant of the shopping center that would be a parking intensive user, and 4) understanding clearly whether any outparcel owners will have parking rights in the main shopping center area and limiting these rights, as needed. The tenant's counsel should try to negotiate a termination right if the landlord does not protect the availability, access and visibility of tenant's parking spaces. See generally Foster, C.T., Construction and Operation of Parking-Space Provision in Shopping Center Lease, 56 A.L.R.3d 596 (2005) (detailing case law in which various courts address the construction of parking space provisions in shopping center leases).

Industrial Leases

While probably not as critical as in the retail and office leasing context, the size and location of parking facilities also can be of particular concern in industrial leases. Often, it is more important to the industrial tenant that access to the loading docks is maintained and that the tenant has the right to park trucks on a temporary basis. Of course, the tenant's counsel needs to make sure that adequate spaces are allocated for the use of tenant's employees and guests and that the terms and conditions for the use of the spaces (usually at no charge) are specified. The tenant's counsel may also want to negotiate for the lease to provide that the parking of trucks and trailers is permitted at truck dock positions and in other paved areas expressly designated for such purpose in the pre-approved plans.

Conclusion

In sum, whether negotiating or drafting an office, retail or industrial lease, tenant's counsel should make every effort to make sure that the lease contains an unambiguous parking provision.

Part Two of a Two-Part Series

Essential Negotiation Considerations in Various Commercial Leases

Office Leases

Designated, reserved parking spaces appurtenant to office leases are highly valued by certain types of tenants, especially in the downtown, metropolitan markets. Thus, a tenant's counsel must carefully consider the parking provision when negotiating an office lease. Landlord-oriented form leases often give the landlord the right: 1) to expand or change any parking area, 2) to temporarily close off portions of the parking areas for purposes of expanding, repairing, restoring, constructing or reconstructing the parking decks, and 3) to change, from time-to-time, the rules and regulations with regard to the parking area. The tenant's counsel should always make sure that the lease properly limits these rights so that they cannot be used in a manner that will potentially, adversely affect the tenant's use of its parking rights. All new rules should be limited by a “reasonableness” qualifier, and the landlord should be required to enforce the rules and regulations in a “nondiscriminatory manner as against tenant.”

Other important considerations in office leases include: 1) what security services will be provided, 2) if the lease is in an urban area, whether there will be overflow parking, tandem parking or valet parking, 3) whether there will be designated visitor parking, and if so, the location and cost of such visitor parking, 4) whether the landlord will provide a validation procedure for the tenant to use for its guests, and 5) whether the tenant may recall any portion of the parking allocation (as discussed in Part One).

Shopping Center Leases

The availability and adequacy of parking facilities are of utmost importance in shopping center leases. The financial viability of the individual tenant's business as well as the owner or operator of the shopping center hinges on the customers' ease of parking and access to the shopping center. See Joseph v. Hustad Corp ., 454 P.2d 916 (Mont. 1969) (stating that “[s]hopping centers exist because of an abundance of parking area and ease of access from and to the same … [d]eny either parking or access thereto and they cease to exist as a viable entity”). The reality of shopping center leasing, however, is that the ability and leverage of a shopping center tenant to receive favorable parking provisions will depend upon whether the tenant is an anchor tenant/national retailer or a small local tenant.

A shopping center tenant should be concerned about: 1) no-build zones in parking areas, 2) the traffic flow to and from the parking area and within the parking area, 3) prohibiting the landlord from leasing to any future tenant of the shopping center that would be a parking intensive user, and 4) understanding clearly whether any outparcel owners will have parking rights in the main shopping center area and limiting these rights, as needed. The tenant's counsel should try to negotiate a termination right if the landlord does not protect the availability, access and visibility of tenant's parking spaces. See generally Foster, C.T., Construction and Operation of Parking-Space Provision in Shopping Center Lease, 56 A.L.R.3d 596 (2005) (detailing case law in which various courts address the construction of parking space provisions in shopping center leases).

Industrial Leases

While probably not as critical as in the retail and office leasing context, the size and location of parking facilities also can be of particular concern in industrial leases. Often, it is more important to the industrial tenant that access to the loading docks is maintained and that the tenant has the right to park trucks on a temporary basis. Of course, the tenant's counsel needs to make sure that adequate spaces are allocated for the use of tenant's employees and guests and that the terms and conditions for the use of the spaces (usually at no charge) are specified. The tenant's counsel may also want to negotiate for the lease to provide that the parking of trucks and trailers is permitted at truck dock positions and in other paved areas expressly designated for such purpose in the pre-approved plans.

Conclusion

In sum, whether negotiating or drafting an office, retail or industrial lease, tenant's counsel should make every effort to make sure that the lease contains an unambiguous parking provision.