Vertical and Horizontal Transportation: When Is Convenience a Bad Thing?

Relocation or Closure of Vertical and Horizontal Transportation

As shopping centers are renovated over time, and as new concepts evolve in the shopping center market, the need to connect various locations within the shopping center through the use of vertical and horizontal transportation becomes more important. The tenant that has an escalator that delivers customers to a location right outside of its storefront, however, may be greatly affected if the escalator were moved to another location in the shopping center or closed down for any extended period of time. As a result, a tenant should include in its lease a provision that any vertical or horizontal transportation that exists as of the date of the lease will not be relocated or closed during the term of the lease without that tenant's consent. At a minimum, the tenant should have the right to have its rent adjusted or have the right to terminate its lease, if vertical or horizontal transportation are removed or relocated during the lease term.

Landlords should be careful not to allow tenants to dictate completely how the landlord develops the common areas of the shopping center. Further, landlords should not allow tenants to have an adjustment to the rental or a termination right if the gross sales of the tenant are not affected by the removal or relocation of the vertical or horizontal transportation. As a result, landlords may want to request a gross sales test under which a tenant would not have the right to have its rent adjusted or the right to terminate the lease unless the tenant's gross sales decline by 20% or more following the removal or relocation of the vertical or horizontal transportation. In any event, a landlord should resist any request from the tenant to have the lease provide that the landlord cannot remove or relocate any vertical or horizontal transportation during the term of the lease. If a landlord agrees to such a request, it can severely impact and restrict the landlord's ability to redevelop and reconfigure the shopping center to the benefit of all tenants and customers.

Changing Means of Vertical and Horizontal Transportation

Typically, most tenants and customers would agree that converting stairways into escalators would be more beneficial for all parties using such transportation both in ease of travel for the customers and the speed of moving customers throughout the shopping center. However, since an escalator can obstruct and obfuscate visibility of a tenant's storefront (much more so than say a glass enclosed stairway), the affected tenant may experience a dramatic impact in its business based upon the conversion of the stairway to an escalator. The conversion of a stairway to an escalator may have the same impact as if the landlord placed a wall in front of the tenant's signage or storefront because the signage and storefront may no longer be visible from the common areas of the shopping center. Tenants may want to designate certain vertical transportation within the enclosed shopping center that if modified would trigger certain rights for the tenant. The rights may include the right to adjust the tenant's rental obligation or the right to terminate the lease in the event vertical transportation is converted during the term, if the conversion restricts the visibility of the tenant's signage or storefront.

Once again, landlords should be careful not to negotiate away the right to control the common areas of the shopping center and the vertical and horizontal transportation that is included therein. Further, similar to reserving the right to remove such vertical and horizontal transportation, landlords may want to retain the rights to convert such vertical and horizontal transportation to other means of transportation, in order to benefit all tenants and customers of the shopping center.

By carefully examining the vertical and horizontal transportation issues, landlords and tenants can attempt to draw a balance between the needs of landlords to control the common areas and the needs of a tenant to have appropriate access and customer traffic flow to, and visibility of, the tenant's premises from the vertical and horizontal transportation in the common areas. If a tenant chooses not to address these types of issues, the tenant may be surprised to learn that what once was a terrific location in the shopping center, becomes a less desirable location due to the placement, relocation, or conversion of vertical and horizontal transportation.

Model Clause for Vertical and Horizontal Transportation (Tenant Version)

Notwithstanding anything to the contrary contained in this Lease, Landlord shall not place any vertical or horizontal transportation within fifty feet (50') along any point of the storefront lease line of the Premises. Further, to the extent that any vertical or horizontal transportation currently exists within fifty feet (50') from the Premises, Landlord agrees that such transportation will not be changed, relocated, removed, altered, closed for more than seventy-two (72) consecutive hours, or converted to another means of transportation without obtaining Tenant's prior written consent, which consent may be withheld in Tenant's sole discretion. In the event Landlord violates the terms of this paragraph, Tenant shall have the right, upon notice to Landlord, either to: (i) pay ___% of Gross Sales in lieu of Minimum Rent and Percentage Rent under this Lease; or (ii) terminate this Lease. In the event Tenant terminates this Lease, as provided herein, then on the termination date set forth in Tenant's notice of termination, Landlord shall pay to Tenant the amount of Tenant's unamortized leasehold improvement cost, amortized on a straight-line basis over the term of this Lease.

Model Clause for Vertical and Horizontal Transportation (Landlord Version)

Landlord and Tenant acknowledge the existence of certain vertical and horizontal transportation, including elevators, escalators, pedways, stairways, and other similar or like transportation, in the common areas of the Shopping Center ('Transportation Devices'). Tenant hereby waives all claims, causes of action, damages, liabilities and costs associated with the removal, relocation, change, additions, altering, closure or conversion to other Transportation Devices of any of the Transportation Devices located or to be located in the Shopping Center (collectively referred to as 'Adjustments to Transportation Devices'). Landlord reserves, in its sole and absolute discretion, the right to make Adjustments to Transportation Devices during the term of the Lease.

Glenn A. Browne is a shareholder in Braun, Browne & Associates, P.C., in Riverwoods, IL. His law practice is concentrated in the areas of purchase and sale of real estate, commercial leasing, and lease related matters.

Part Two of a Two-Part Series

Several issues or potential issues arise when addressing the presence of vertical and horizontal transportation within the common areas of an enclosed regional shopping center. The first part of this article discussed accessibility and visibility. The conclusion addresses relocation or closure of the transportation, and changing the means of transportation. Sample provisions are provided.

Relocation or Closure of Vertical and Horizontal Transportation

As shopping centers are renovated over time, and as new concepts evolve in the shopping center market, the need to connect various locations within the shopping center through the use of vertical and horizontal transportation becomes more important. The tenant that has an escalator that delivers customers to a location right outside of its storefront, however, may be greatly affected if the escalator were moved to another location in the shopping center or closed down for any extended period of time. As a result, a tenant should include in its lease a provision that any vertical or horizontal transportation that exists as of the date of the lease will not be relocated or closed during the term of the lease without that tenant's consent. At a minimum, the tenant should have the right to have its rent adjusted or have the right to terminate its lease, if vertical or horizontal transportation are removed or relocated during the lease term.

Landlords should be careful not to allow tenants to dictate completely how the landlord develops the common areas of the shopping center. Further, landlords should not allow tenants to have an adjustment to the rental or a termination right if the gross sales of the tenant are not affected by the removal or relocation of the vertical or horizontal transportation. As a result, landlords may want to request a gross sales test under which a tenant would not have the right to have its rent adjusted or the right to terminate the lease unless the tenant's gross sales decline by 20% or more following the removal or relocation of the vertical or horizontal transportation. In any event, a landlord should resist any request from the tenant to have the lease provide that the landlord cannot remove or relocate any vertical or horizontal transportation during the term of the lease. If a landlord agrees to such a request, it can severely impact and restrict the landlord's ability to redevelop and reconfigure the shopping center to the benefit of all tenants and customers.

Changing Means of Vertical and Horizontal Transportation

Typically, most tenants and customers would agree that converting stairways into escalators would be more beneficial for all parties using such transportation both in ease of travel for the customers and the speed of moving customers throughout the shopping center. However, since an escalator can obstruct and obfuscate visibility of a tenant's storefront (much more so than say a glass enclosed stairway), the affected tenant may experience a dramatic impact in its business based upon the conversion of the stairway to an escalator. The conversion of a stairway to an escalator may have the same impact as if the landlord placed a wall in front of the tenant's signage or storefront because the signage and storefront may no longer be visible from the common areas of the shopping center. Tenants may want to designate certain vertical transportation within the enclosed shopping center that if modified would trigger certain rights for the tenant. The rights may include the right to adjust the tenant's rental obligation or the right to terminate the lease in the event vertical transportation is converted during the term, if the conversion restricts the visibility of the tenant's signage or storefront.

Once again, landlords should be careful not to negotiate away the right to control the common areas of the shopping center and the vertical and horizontal transportation that is included therein. Further, similar to reserving the right to remove such vertical and horizontal transportation, landlords may want to retain the rights to convert such vertical and horizontal transportation to other means of transportation, in order to benefit all tenants and customers of the shopping center.

By carefully examining the vertical and horizontal transportation issues, landlords and tenants can attempt to draw a balance between the needs of landlords to control the common areas and the needs of a tenant to have appropriate access and customer traffic flow to, and visibility of, the tenant's premises from the vertical and horizontal transportation in the common areas. If a tenant chooses not to address these types of issues, the tenant may be surprised to learn that what once was a terrific location in the shopping center, becomes a less desirable location due to the placement, relocation, or conversion of vertical and horizontal transportation.

Model Clause for Vertical and Horizontal Transportation (Tenant Version)

Notwithstanding anything to the contrary contained in this Lease, Landlord shall not place any vertical or horizontal transportation within fifty feet (50') along any point of the storefront lease line of the Premises. Further, to the extent that any vertical or horizontal transportation currently exists within fifty feet (50') from the Premises, Landlord agrees that such transportation will not be changed, relocated, removed, altered, closed for more than seventy-two (72) consecutive hours, or converted to another means of transportation without obtaining Tenant's prior written consent, which consent may be withheld in Tenant's sole discretion. In the event Landlord violates the terms of this paragraph, Tenant shall have the right, upon notice to Landlord, either to: (i) pay ___% of Gross Sales in lieu of Minimum Rent and Percentage Rent under this Lease; or (ii) terminate this Lease. In the event Tenant terminates this Lease, as provided herein, then on the termination date set forth in Tenant's notice of termination, Landlord shall pay to Tenant the amount of Tenant's unamortized leasehold improvement cost, amortized on a straight-line basis over the term of this Lease.

Model Clause for Vertical and Horizontal Transportation (Landlord Version)

Landlord and Tenant acknowledge the existence of certain vertical and horizontal transportation, including elevators, escalators, pedways, stairways, and other similar or like transportation, in the common areas of the Shopping Center ('Transportation Devices'). Tenant hereby waives all claims, causes of action, damages, liabilities and costs associated with the removal, relocation, change, additions, altering, closure or conversion to other Transportation Devices of any of the Transportation Devices located or to be located in the Shopping Center (collectively referred to as 'Adjustments to Transportation Devices'). Landlord reserves, in its sole and absolute discretion, the right to make Adjustments to Transportation Devices during the term of the Lease.

Glenn A. Browne is a shareholder in Braun, Browne & Associates, P.C., in Riverwoods, IL. His law practice is concentrated in the areas of purchase and sale of real estate, commercial leasing, and lease related matters.