Retail Space Leasehold Improvements, Alterations, & Fixtures

Retail Space Leasehold Improvements, Alterations, & FixturesIn most retail space leases landlords typically have a clause in the lease that allows them to keep any tenant improvements that are attached to the floor or walls. This clause is a tough one to have removed from the lease during negotiations however IF possible do whatever you can to do so.

What the Clause typically looks like

The clause in the lease is typical entitled Additions & Fixtures or Leasehold improvements & alterations. The language will look something like this: All improvements, fixtures, & additions that are attached in anyway to the Premises (other than unattached trade fixtures that are moveable) that are installed by either the tenant or landlord shall become the landlords property when the lease terminates. Landlord shall also have the right to request the tenant remove any improvements, fixtures, & additions that it deems necessary in which tenant, at its own cost shall remove the items and restore the Premises to its original condition.

Is it Fair that the Landlord Can do this?

Not really however depending on the market you are leasing in and the type of business you have you may not have a choice.  It depends on a lot of factors (e.g size of your business, current market conditions, type of business, etc.).  For example maybe you have a retail business that sells flooring (e.g. hardwood, tile, etc) and your space is essentially a showroom.  If you were to install some nice flooring in the space that was ALL the same then the landlord would probably not require you to remove it.  If you installed samples of many different types of flooring that do not match then the landlord may ask you to remove it.

What You Need to do

During your retail lease contract negotiations your first objective would be to have this clause removed entirely.  Again in most cases this may not be possible however you must try.  If the landlord just won’t budge on removing it then try to incorporate some kind of language that limits what you must remove or leave behind.  If your retail space is used for a showroom then try to limit what you attach to the walls and floors.  Remember anything attached to the floors or walls will become the property of the landlord.  When designing your space do what you can to minimize installing a bunch of fixtures that are out of the ordinary.  If the landlord determines that you have installed a bunch of non-usable fixtures then they will ask you to remove them.

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