Robert Eisenberg: But colocation clauses, unfortunately for homeowners, are often just an activity cost. You are a way to share the risk with tenants and it is sometimes necessary to attract tenants to a new development or perhaps to a centre that you want to renew or rehabilitate. But there are great risks for homeowners, and one of the biggest is, it`s a risk to your financing. If there is a potential for a tenant to sink, it may be one thing, but if they have the ability to pay or even terminate a reduced or reduced rent, the landlord could cause a lot of grief with their lenders, because it could mean an interruption in the income stream for the property, and a blow to the effect, that they may find it difficult to pay their mortgages. A successful co-location clause is clear and works for both the tenant and the landlord, and tenants must ensure that they are compensated fairly or protected in the event of unforeseen circumstances. It is highly recommended that tenants who are considering renting commercial space related to tenants have a representative who protects their needs from possible future colocation issues. Robert Eisenberg: Let me start with the tenants because I think it`s a little more obvious. Co-tenancies are most useful in two main contexts. The first is for a new development or a new shopping center. And the co-location reports here ensure that as a tenant, you are not the first or only tenant to work here. Suppose the landlord struggles to rent other parts of the center or decides he doesn`t want to build as much as he originally did. We are now seeing a lot of things where construction costs have become very high. Landlords decide, “Maybe I don`t want to build as much as I thought at first” or say to other tenants, “Maybe it`s not economically feasible for us to open our stores.” Therefore, if you have a co-location clause in your lease, you prevent you from opening and being the only tenant in a development where no one else pulls the traffic.
It may not be as big or a goal as you thought. In these situations, we usually see the opening of Co-Tenancies, because as soon as everyone is open, the idea is that now everyone is open, the risk is more minimal for me. Robert Eisenberg: In existing properties, co-tenancies protect against tenants holding the bag and being the last man standing. If there is a lot of emptiness in a center or if the anchor tenants leave, the tenant concerned can either receive a reduced rent, or cease operations, or even terminate his lease to get out of a dying mall or other. And this is a situation where it is more common to see co-tenancies in motion. However, from a landlord`s perspective, landlords say all the time, “Why should I ever give a co-location clause? There is no benefit to an owner. And that`s more or less true. Karsten Lee: Today we`re going to talk about Co-Tenancies.