Covenants, Conditions and Restrictions
Hello tenants and landlords, I’m here to speak with you today about “covenants, conditions and restrictions” in a commercial real estate lease, also known as “CC&Rs”. You can think of them as community standards. They are rules and limitations that are set out by the landlord and all of the tenants are supposed to follow them.
Get a copy in writing- and any changes, too, so you know what standards you are supposed to follow. What if there’s another tenant that violates the CC&Rs and it affects your business operations? The landlord might be responsible for enforcing them- or not. Let’s discuss before you sign on that dotted line.
Commercial Real Estate Case Study
CCRs can make for better neighbors
Sarah owned a spa and had a thriving business catering to people who were looking for a serene environment where they could relax while getting their treatments. Feeling refreshed, rejuvenated and relaxed after visiting Sarah’s spa was one of the most important parts of her busines success.
Sarah was excited to meet her new neighbor that moved in- who wouldn’t want to be next to an ice cream shop? She was less excited when she learned that they planned to blast their distinctive ice cream jingle over loudspeakers that were on the outside patio, as well as the inside dining room that shared a wall with many of the treatment rooms.
The sound penetrated the inner sanctum of the spa and clients started to complain. The ice cream shop said it has the right to play the music, and suggested that Sarah get soundproofing for the interior of her building. Sarah thought there should be some protections in her lease against other tenants making loud noises that disturbed her client base.
Those protections were negotiated into the CCRs, or covenants, conditions and restrictions, in her lease. The landlord didn’t want to negotiate them, because they applied to all tenants and the landlord didn’t want to make an exception. The landlord did want Sarah’s business, though, so they agreed to make an exception and promised that sound from other tenants wouldn’t disturb her business operations.
Sarah showed her landlord the provision in her lease that allowed her to reduce the amount of rent that she was paying if this covenant was breached. The ice cream store didn’t negotiate any protection for its sound system in its lease, so it had to reduce the sound volume on the outside patio. The landlord wanted to keep both tenants, so they worked it out where Sarah would add additional soundproofing to the shared wall and the landlord and the ice cream store would reimburse her, and the ice cream store could keep playing its signature song.
Sarah was able to make her lease work for her because she knew that sound was important at the start and she and her attorney worked to negotiate what she needed into her lease.