When we’re deep in the day-to-day of running our shops, the last thing on our minds might be the specifics of our lease’s operating hours. But whether we're approaching a lease renewal, or just reviewing an unexpected common area maintenance (CAM) charge, those seemingly small clauses about when our doors need to be open can have a big impact. We often think of our operating hours as a given, especially if we’re in a mall or a shopping center with set hours. However, the details of those "shop covenants" are often more negotiable than we realize.

Decoding Shop Covenants

We spotted an insightful piece from Federman Steifman LLP that really zeroes in on these shop covenants, which are essentially the lease clauses dictating our operating hours and continuous operation. The authors highlight a key dynamic: landlords typically push for broad, ironclad language requiring tenants to be open continuously during all specified hours. Their reasoning is usually about maintaining a vibrant, active center and maximizing foot traffic. However, the piece notes that this isn't a take-it-or-leave-it situation. It points out that while landlords want that uninterrupted operation, tenants absolutely can and should negotiate specific carve-outs. These aren't minor requests; they're essential protections for real-world business challenges.

What This Means for Us

Think about it: what happens when we need to remodel? What if there's an unexpected staffing crisis, or a temporary closure due to a plumbing issue, or even a regional power outage? Without specific language in our lease, these situations could put us in breach of our shop covenants. The piece emphasizes that we can negotiate for exceptions covering these exact scenarios – things like temporary closures for renovations, inventory, or even unexpected emergencies.

Without these explicit carve-outs, a landlord might have grounds to declare a default, potentially leading to fines, demands for accelerated rent, or even termination of the lease. For instance, if our lease requires us to be open from 10 AM to 9 PM daily, and we close for three days to repaint and re-fixture, a landlord could argue we've violated the continuous operation clause. This isn't just a theoretical concern; it can translate directly into financial penalties. We might see an increase in our CAM charges if the landlord tries to recoup lost revenue they attribute to our "non-operation," or even face legal action.

A reasonable negotiating position, as implied by the article, involves proposing specific conditions under which we are *not* required to operate. This isn't about avoiding work; it's about building in necessary flexibility for the realities of running a business. We should aim for language that allows for temporary closures due to force majeure events (like natural disasters), necessary repairs or renovations, and even short-term staffing challenges, provided we give reasonable notice. It also means clarifying what "operating" truly means – does it mean having every light on and every employee present, or simply being open for business to the public? These distinctions can be crucial in a dispute.

Actionable Steps for Tenants

This week, let’s pull out our leases and find the sections on operating hours and continuous operation. Pay close attention to any language about "uninterrupted operation" or "required hours." If a renewal is coming up, make a note of any necessary carve-outs we need to propose based on our past experiences – think about any times we’ve wished we could close temporarily without penalty. If we’re mid-lease and facing a situation where we might need to close temporarily, review those clauses carefully before making any moves, and consider discussing it with the landlord in advance. Sharing our experiences in the forum about how we've negotiated these clauses, or challenges we've faced, can help us all be better prepared.