Promoting a shopping centre: who pays?
JANUARY 2009
With many retailers feeling the pinch, it is understandable that service charge demands will be scrutinised more closely than ever. One area that can cause particular problems is the ability for a landlord to recover its costs in “promoting” its shopping centre.
The recent High Court case of Boots UK Limited v Trafford Centre Limited (2008) dealt with this issue. The landlord had provided various amenities for the shopping centre (eg. Santa’s grotto, crèche and play area), as well as Christmas decorations and a “Sky Wall” (large permanent TV screen). The landlord and tenant agreed that these were all items that were covered by the service charge.
However, the key question was whether they fell within the definition of a “Promotion” within the lease. This was crucial because the lease required the Landlord to pay 50% of the cost of any Promotion items itself, and in addition the total cost of Promotion was not allowed to exceed 10% of the Tenant’s total net service charge.
“Promotion” was defined in the lease as “advertising and other forms of promotion of the Centre intended to bring additional custom to the Centre…”. The Tenant argued that the various entertainments, decorations and Sky Wall were covered by this definition.
However, the High Court disagreed. It held that these items were in fact “facilities, amenities or attractions”, rather than a form of promotion. The only exception was when the Sky Wall was used to provide information about the shopping centre – in that case the 10% cap would apply and the cost would be shared with the Landlord.
Retail tenants and landlords will need to look closely at the provisions of their leases, in particular where there is a provision for sharing promotion costs. Those negotiating new leases of shopping centre premises would also be well advised to make sure that the lease spells out the items where the cost will be shared between the landlord and the tenant, to avoid uncertainty at a later date.
If you would like further information on the content of this newsletter please contact Michael Collins on 0207 404 0606 or by email at mcollins@gdlaw.co.uk
This guide is for general information and interest and should not be relied upon as providing specific legal advice. |
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