Restrictive Covenants in Commercial Developments

The recorded agreements between property owners (and sometimes major tenants) that set forth the guidelines for the construction, management and operation of a multi-parcel commercial retail development are generally known under a variety of names such as “conditions covenants and restrictions,” or “reciprocal easement agreements” or “operation and easement agreements” (collectively an “REA” for purposes of this article); yet whatever the name of the recorded agreements, they are generally intended to add value to the shopping center and protect the interests of the property owners and tenants, as the case may be.

Quite often REAs are associated with large department store-anchored regional shopping malls that comprise acres upon acres of land; however, REAs are now also frequently used with smaller developments that may comprise a few acres and have multiple stand-alone parcels. In many areas of the country, these types of developments are “in fill” projects in urban areas where the availability of developable land is limited. An example of this smaller development could be a development with a drug store on a corner, a restaurant with sit-down service on an adjacent parcel, and a fast food restaurant with a drive-through facility on another parcel, where all the parcels would have common access to each other. The landlord may decide for investment purposes to sell each parcel separately. To add value to ' or at least maintain value of ' all the parcels, an REA would be necessary. Most likely, each tenant (or occupant) of such a development would want to be part of the process in drafting the REA to protect its interests (such as the permitted use and exclusive use restrictions).