Shopping/strip center tenant non-permitted use question

4 Replies

We bought a shopping center two months ago. It's our first shopping center, after previously owning 4 warehouse/flex industrial uses. 

The center is very well maintained with tremendous upside- the previous owner was a big company focused on its development business and neglected this center (it was its only shopping center), such that it has about 68% occupancy. We already have one lease contract out and have been canvassing to fill our other vacancies. Some of our canvassing has been to put in a dance/fitness user.

We have one tenant whose lease states that the "Demised Premises shall be used solely for retail purposes to operate a casual dining restaurant/cafe".

This tenant is new to the shopping center as of a few months prior to our taking ownership. He has really brought a lot of traffic with his cafe. He has live music several times a week, has theme nights, like Mexican Food night- this is all great and within the terms of the lease.

The tenant had a zumba night one week ago for the first time, and just posted to social media that they are starting a weekend early morning yoga series. On Saturdays directly in front of his storefront he has had a third party sell fruits/veggies. This farm stand does block up part of the sidewalk. The neighboring businesses state they are fine with the farm stand but it also deviates from the permitted use in the lease. We have two other tenants (a bakery and sports bar) who the previous owner prohibited from having tables and chairs out for customers.  We have maintained the same stance. So, it's a bit of a contradiction to allow the farm stand but not the actual paying tenants to have tables and chairs outside. 

Am I being petty if I call and put an end to the yoga and dance events the cafe has been having? It's prohibited by the lease so we are within our rights to do so. I hesitate because this plaza had been stagnant for years and this tenant is bringing customers to his cafe which has brought more customers to the other tenants.

Do any of you landlords/property managers have cafes that also run fitness or yoga events? Just looking to get some thoughts as we are unsure how to treat this.

That doesn't sound typical at all, but if it brings in business, so be it. Do the dance schools you have been speaking to have an issue with it? Yoga I can see a fitness center having an issue with. I would probably send a notice that he is in violation of the lease and in the event that you have a user come in that disputes their right to those uses they will have to immediately cease. If no one is complaining, then until you have some reason to stop him, I guess there's no harm in letting it go. The only thing you have to be careful of is him saying well you let it go on all this time, so the notice is a good idea to establish your position early. 

You need to check your lease if it is allowed to be able to have outside dining and within compliance with city and county codes.

Additionally check on how you are paid per the lease. If they put an outside space to eat that is substantial then you decide if you want to charge a certain rent per sq ft for that as the business is generating additional sales per ft.

No legal advice given.