I was wondering what advice you guys can give concerning a recently vacated retail space.

Right now, prospective tenants want the space for about 50% of what it was renting out previously. With the economy as it is, they can command that. And, they all want to have at least 10 year leases.

On the other hand, just leaving it empty for 3-5 year until the economy comes back really doesn't seem the best idea.

Any suggestions?

How would I word that within the lease? Rent is based upon gross revenue of the business?

It is standard in retail leasing to have a base rent plus a percentage of sales above a stated minimum. The base rent can be flat through the lease term or it can have annual increases or cost of living increases.

What is unknown from your post is if this is a stand alone property or part of a mall. If it is even a strip mall then the retail lease needs to include real estate taxes and common areas operating expenses .

NC, we have several retail leases in place but none based upon sales so it would be something new to me.

Tim:

Here's a link with a sample of a retail lease: www.crosscountymall.com/sample-lease-cc-mall.pdf

While the language is complex the most important factor will be determining the accepted percentage of sales rate for the specific store type in your area.

And while I appreciate not wanting to pay your attorney just remember that you might be living with this lease for 10 years. Too long to have a lease that doesn't protect you.

Maybe you can find a commercial Real estate Broker in your area who would be willing to offer some insight. Try the Realtor Association in your area. They aren't allow to write leases ( at least not in most states)but they sure know what needs to be included.

Hope this helps.

Thanks, NC.

I'll take a look at what you linked. To be honest, the lawyers that I consult with are supposedly the best around here but as a small owner, it's hard for them to give me the time of day. On the other hand, the smaller firm lawyers usually end up being what you pay for which isn't very good. Then, they still charge you an arm and a leg. But, this post isn't about venting about lawyers.

I use one of the largest law firms in the country for everything BUT Real Estate - at their recommendation. Their position was I needed a good tenant/LL attorney who would be available as issues came up and not charge a ton. The larger firms simply are not setup for that type of arrangement.

They referred me to an extremely competent woman who thankfully has a great sense of humor since I tend to rant whenever she gives me advice that I don't like (but eventually follow her advice).

You might want to ask some of the commercial RE Brokers. They probably can refer someone that they think does a good job.