Leasing space in New York City: 15 things a big box retailer should know when negotiating for

Leasing space in New York City is different from virtually anywhere else. Last year while certain areas of the country began to experience a slowing of the market, 2006 was a record year in the city for commercial real estate. A severe shortage of space sent rental rates skyrocketing (according to some reports, more leases were signed last year with a rent above $100 per s/f than in all previous years combined), and gone were many concession packages that retailers relied on, such as rent-free time to build-out and prepare space. Though many say the pace of deals is slowing, it is still very much a landlord's market. The following are useful tips for retailers negotiating in N.Y.C.: 1. Lease Form Be careful in your choice of lease form because this has a big impact on the ultimate outcome of your deal. This is especially true in New York City, where the standard lease forms are very pro-landlord and not geared to big box tenants. 2. Ownership Structure of the Building NYC buildings typically have a multi-layer ownership structure with complicated financing. Title must be reviewed carefully, and you should request subordination, non-disturbance and attornment agreements and recognition agreements all the way up the chain of title (including lenders). 3. Co-op Buildings If the building is a co-op, you will need to review the proprietary lease to make sure you can use the premises in your customary fashion. In addition, you should request a recognition agreement from the co-op board to protect you in case your landlord defaults under the proprietary lease. 4. Condominiums If the building is a condominium, you will need to review the condominium declaration to make sure you can use the premises in your customary fashion. In addition, you should request a non-disturbance agreement from the condominium association to protect you in case your landlord defaults in the payment of common expenses as most condominium associations have lien rights for the non-payment of common expenses. 5. Loading In mixed-use buildings, the loading dock is often shared by the building occupants. Ideally, the building will have a dock master who will coordinate the use of the loading dock. If not, you should negotiate to obtain priority rights to the loading dock during certain hours and an alternate means of loading/unloading if the main loading dock is unavailable. 6. No-Change Areas Identify those areas outside of the premises that are critical to your use, and make certain that those areas cannot be changed. 7. Scaffolding You need protection if your landlord erects scaffolding. Your lease should protect you so that access to your store and the visibility of your signage is not obstructed, and also should prohibit scaffolding from being erected during your grand opening and the holiday season. 8. Conditional Limitation N.Y. landlords often add this language so a lease automatically terminates in the event of a tenant default. This means that the landlord is able to bring a hold-over proceeding that could get you evicted without having a post-judgment statutory cure period (as opposed to a non-payment proceeding which provides for a post-judgment statutory cure period). If the landlord claims you are in default, it is imperative that you seek a Yellowstone injunction to toll the running of the applicable cure period in the lease. 9. Certificate of Occupancy Insist that your landlord be responsible for curing any building violations that would prevent you from receiving a certificate of occupancy following the completion of your fit-up work. 10. Building Expenses and Taxes If a base year concept is used, make certain that the base year reflects a fully assessed, leased and occupied building. 11. Sidewalks Avoid being responsible for maintaining the sidewalks (including removing snow and ice from the sidewalks) in order to reduce your liability in case of slips and falls. 12. Assignment/Subletting Make sure that corporate-type transactions and the sale of stock on a publicly traded stock exchange are not prohibited assignments under the lease. 13. Self-Insurance N.Y. form leases do not provide for the tenant to be able to self-insure. Make sure you insert a self-insurance provision into the lease if this is something you do. 14. Landlord's Obligation to Enforce Superior Documents If there is a superior instrument that obligates someone other than your landlord to maintain the structure, building systems or exterior, make sure your lease obligates your landlord to enforce that instrument. 15. Satellite Dishes If you need a satellite dish to communicate with your home office or other stores, you need your landlord to grant you easements in the lease in order to permit you to use building chases and the rooftop for your satellite dish. David Rabinowitz, Esq., is a partner at Sutherland Asbill & Brennan LLP., and co-chair of Sutherland's Retail Practice Group, New York, N.Y.