Leasing a shopping-centre unit – Part two: What management companies should know

If you haven’t already read the first part of our series.

Anyone who manages a shopping centre knows that it is not just a collection of individual shops. It is a single destination, with its own identity, brand and reputation. Every letting, no matter how small, affects the whole. An empty or darkened unit can sap energy from an entire floor. A tenant with too much exclusivity can restrict the centre’s ability to refresh its mix. A poorly drafted service-charge clause can leave owners footing bills that should have been recoverable.

From a legal perspective, running a shopping centre is therefore about more than signing leases. It is about designing a contractual framework that supports the smooth running and long-term value of the entire scheme.

The special role of anchor tenants

Anchor tenants (for example, department stores, supermarkets, cinemas or gyms) play an outsized role in the health of a centre. Their leases often include bespoke concessions on rent, service charge or signage, as well as exclusivity rights that ripple across the whole scheme.

These deals may be necessary to secure an anchor or first letting, but they can have knock-on effects for the landlord’s ability to manage other tenants. For example, a wide exclusivity for a supermarket anchor could limit the variety of food retailers allowed elsewhere in the scheme.

Negotiating these anchor agreements carefully, and understanding how they interact with standard leases, is one of the most important legal challenges for a landlord.

Managing co-tenancy risk

Related to anchors are so-called “co-tenancy” clauses, which sometimes allow other tenants to pay reduced rent or even break their lease if an anchor leaves or if vacancy rates rise. These provisions are more common in North America, but they are creeping into UK negotiations.

For landlords, they represent significant risk: the departure of one tenant can trigger a cascade of rent reductions. It is critical to resist or tightly control these clauses, limiting their scope, duration and financial impact.

Making turnover rent work in practice

Turnover rent has become a defining feature of modern shopping-centre leases, but it is also one of the most legally intricate. The principle is simple enough: the landlord shares in the tenant’s sales success, and the tenant has a degree of protection if trade falls short. But the devil is in the detail, and this is where disputes most often arise. The question of what counts as “turnover” has been transformed by omnichannel retailing. Should a click-and-collect order placed online but fulfilled in-store be included? Should online orders returned at a physical unit be deducted? If the drafting is unclear, both sides can find themselves in conflict.

Another area that needs careful handling is audit and reporting. Landlords require transparency to ensure they are receiving their proper share of turnover, but overly aggressive information requirements can stray into data protection issues or create friction with retailers. The most effective clauses are those that provide clear, regular reporting requirements, backed by sensible audit rights, without demanding intrusive access to commercially sensitive systems.

Then there is the balance between base rent, turnover share, and valuation. A pure turnover rent can make income unpredictable and affect the landlord’s ability to refinance or sell the asset. Conversely, too high a base rent can defeat the purpose of the turnover model. Floors, caps and hybrid formulas must be carefully structured to align incentives while keeping the income stream bankable. In short, turnover rent can be a powerful tool, but only when the legal drafting anticipates how retail works today.

Service charges

Service charges are the lifeblood of centre management, but also the source of many disputes. For landlords, they fund the cleaning, lighting, security, marketing and maintenance that keep a centre attractive. For tenants, they are a significant and sometimes unpredictable overhead. The key is drafting service-charge clauses that are both watertight and transparent.

One of the most common pitfalls is the line between recoverable maintenance costs and irrecoverable capital expenditure. If the wording is vague, landlords may discover that necessary investments in plant, energy systems or refurbishments cannot be recovered through the service charge at all. Another frequent flashpoint is the certification clause. Many leases state that the landlord’s certificate of expenditure is conclusive, but the courts have narrowed the effectiveness of such provisions. Unless the drafting is carefully calibrated, tenants can and do challenge certificates, leading to protracted disputes.

Looking ahead, the service-charge landscape is changing. From December 2025, the new RICS Professional Statement will require landlords to adopt greater transparency and accountability. Landlords who draft leases now without anticipating these obligations risk being caught between professional rules and contractual limitations. The most forward-thinking centre owners are already adapting their leases to require clear budgeting, year-end reconciliations, and caps where appropriate, particularly for smaller occupiers. By doing so, they reduce the risk of disputes and build a culture of trust that supports long-term occupancy.

Marketing funds and governance

Alongside service charges, many centres collect a separate marketing levy to fund joint promotions, seasonal campaigns, and events that drive footfall. While essential, these funds can become contentious if tenants feel the money is wasted or poorly accounted for. Landlords should ensure the lease clearly sets out how the marketing fund will be used, how contributions are calculated, and how accounts will be reported. Transparency here builds credibility and protects against challenge.

Building flexibility through relocation and redevelopment rights

No shopping centre stands still. Consumer tastes change, anchor tenants come and go, and investment programmes are essential to keep schemes competitive. Yet many ambitious redevelopment plans have been delayed or blocked entirely because lease provisions have not given landlords the flexibility to act. Relocation and redevelopment clauses are the legal tools that allow owners to invest in their centres without becoming entangled in years of negotiations or litigation.

Relocation clauses are perhaps the most delicate. They usually promise that the tenant will be moved to space that is “equivalent” in quality, size and prominence. In practice, what counts as equivalent can be highly contentious. Is a move from the ground floor to an upper level acceptable if footfall differs? Does a change in shopfront visibility or signage rights count as being “no worse overall”? The wording must be clear, and where necessary supported by compensation provisions that make relocation commercially fair.

Redevelopment break clauses present a different challenge. These provisions allow a landlord to terminate leases to redevelop part or all of a centre. The difficulty is that the courts will enforce such clauses to the letter. If the notice period is even slightly miscalculated, or the conditions for exercising the break are not strictly observed, the landlord can lose the right to break altogether. For that reason, careful drafting and disciplined procedures are critical. A redevelopment strategy is only as strong as the lease clauses that enable it. Implementing a break needs utmost care.

Enforcing trading obligations realistically

A vibrant shopping centre depends on units being open and trading. Darkened shopfronts quickly affect atmosphere, reduce footfall, and harm neighbouring tenants. It is no surprise that landlords want leases to include “keep-open” obligations. The difficulty is that the courts have consistently been reluctant to force retailers to trade against their will. The leading authority, CIS v Argyll, confirmed that judges will not order a business to keep a loss-making store open, largely because the court cannot supervise day-to-day retail operations.

That does not mean such clauses are redundant. While landlords cannot usually obtain an injunction to compel trading, they can still claim damages if a tenant closes in breach of its obligations. The effectiveness of those remedies depends entirely on how the clause is drafted. A vague promise to “keep open during normal business hours” is hard to enforce; a clause that ties trading obligations to clear hours, reporting requirements and financial consequences is much stronger.

This is why modern shopping-centre leases often combine keep-open language with indirect remedies. Some provide for rent adjustments or liquidated damages if stores close. Others link turnover rent calculations to trading, so that tenants cannot shut their doors without a financial impact. Step-in rights, allowing landlords to dress or temporarily occupy closed units, are also common. These measures do not guarantee vibrancy, but they provide practical levers to manage the wider scheme in circumstances where the law will not force trading directly.

Meeting the sustainability challenge

Sustainability has moved from aspiration to obligation. Today, commercial units must meet a minimum EPC rating of E to be legally let. Government consultations suggest this threshold will rise, potentially to a B rating by 2030. For landlords, the risk is two-fold: regulatory non-compliance if units cannot be let, and disputes with tenants if the costs of upgrades are not clearly allocated.

The answer lies in future-proof drafting. Leases should set out how energy improvements will be funded, whether through service charge, direct landlord investment, or tenant contributions. They should also oblige tenants to co-operate with data sharing and energy-saving measures, but without promising outcomes that the base building cannot deliver. Landlords who tackle these issues head-on will avoid costly disputes and protect their asset against regulatory risk.

Renewal strategy, valuation and financing

Finally, every centre needs a clear approach to lease renewals. The Landlord and Tenant Act 1954 gives many tenants a statutory right to renew, unless the lease has been “contracted out.” Contracting out provides flexibility, but if used inconsistently it can create uncertainty across the scheme. Some units will be secure for the long term, others not, and that patchwork can complicate investment strategy. The law is currently under review, and reforms may well change how renewal rights work. In the meantime, landlords should adopt a consistent renewal strategy across their centres.

From the landlord’s perspective, renewal rights are not just a management issue but an investment one. Valuers and lenders look closely at lease lengths, renewal rights and rent structures when assessing the centre’s value. A portfolio of leases with uncertain renewals or volatile turnover rent models can undermine refinancing options. Owners should therefore treat renewal strategy as part of their broader financing plan, not just an operational detail.

The legal framework as a management tool

At its core, running a shopping centre is about operational detail. Those details can only be managed if the leases that underpin them are fit for purpose. Anchor and co-tenancy clauses must be controlled to prevent one tenant’s deal undermining the whole scheme. Turnover rent must be defined in a way that reflects modern retailing. Service-charge and marketing fund provisions must be robust enough to recover costs without endless challenges. Relocation and redevelopment rights must provide genuine flexibility. Trading obligations must be backed by enforceable remedies. Sustainability clauses must anticipate higher energy standards without loading all costs onto one side. Renewal strategy must be consistent and drafted with an eye on valuation and refinancing.

When leases achieve these things, they become more than contracts – they become the machinery that keeps a centre running smoothly and profitably. For landlords and management companies, that is the difference between a destination that thrives and one that struggles to adapt. Read our next instalment: Why shopping-centre leases feel different