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Shopping Center Lease Agreements

October 2014 - Real Estate & Property. Legal Developments by Baspinar & Partners Law Firm.

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In Turkey, especially in Istanbul shopping centers increase in number, as an important constituent of the business life. Some of those are extremely beneficial, even sometimes lessee candidates afford to pay key money to current lessee in order to hold a released store. Besides that there are some projects where the lessee does not make even just one sell until the closing. Before deciding to being a part of any project it is inevitable to make a thoroughly market investigation. Lease Agreement is one of the most important parts of this investigation.



While choosing the beneficial project, an important point is the project manager company, if its portfolio is abound in leading shopping centers, failure risk will be very low. As a disadvantage; this kind of project manager insists for its own lease agreement and usually it is hard to procure acceptance of the amendment requests. A few of the articles considered compelling can bi listed as (i.) ancillary costs, (ii.) penalty clauses, (iii.) changes in the corporate structure of the lessee, (iv.) termination, (v.) stamp duty, (vi.) building modifications undertaken by the lessor, (vii.) competition, (viii.) purpose of lease, (ix.) return of the store, (x.) calculation method of the turnover rent.

Lessor always prefers to act free while calculating the ancillary cost. This kind of costs contains certainly facility services and usually advertising expenses. Certain strong lessees said ‚Äėanchors', as department stores or supermarkets, impose to pay ancillary cost by cap, so lessor share out the rest of the expenses between the other lessees.

Penalty clauses are a must in a lease agreement. Some of them are open to abuse in case of misunderstanding and/or mistake in fact, for sure these must be removed.

Lessor never takes the risk of meeting persons different from the signature process, so it tries to forbid the share transfer upon 49% and bring the sanctions for itself as termination right.

However Lessee may need a corporate restructure, so may transfer share between the family or group company, agreement have to be flexible at this point.

Under Turkish Law, except some special cases, Lessor cannot demand release, before the lapse of ten years from the expiration of the agreement. Although the agreement contains some termination clauses, it is not always possible to apply them against the imparative legal regulations. Besides that the Lesse always needs to have early termination right to avoid penalty payment.

Stamp duty is calculated by considering the price and the term of the agreement. Each party is the legal taxpayer of the stamp duty, howewer lessor prefers to sign it as one original copy and charge the stamp duty burden on  to the lessee.

Anyone pay attention to the ‚Äėbuilding modifications' article in a brand-new shopping center. But usually within 5 or 10 years buidings need a radical modification. In this case customers may stop visiting the mall, so agreement must contain discount at rent and/or time limit for the construction.

Some types of stores, as optician, playground, house-furnishing store may need be sole trade in the shopping center. While specifying the product range you need to consider the competition article. Also the ‚Äėpurpose of lease' article is important in this context.

Finally, ‚Äėcalculation method of the turnover', must be examined as an important article. For instance the returned products, discounts have to be out of the turnover. Otherwise the turnover rent will be unjustly high, out of countenance of the lessee.