If you are in the retail world, chances are that you have had your own personal experience with continuous operation provisions. Or, at the very least, have become introduced to this phrase largely in part to the many problems now facing businesses who operate (or at least are trying to) out of commercial retail spaces.
But before we get too far ahead of ourselves, let us discuss what a continual operation provision actually is.
The clause all retail businesses should know about
What is a continuous operation provision? In short, it is a clause that often comes in commercial leases for retail businesses looking to rent a property. The continuous operation provision is mainly for the landlord’s benefit. It acts as a form of reassurance that the property will actually be used how it is supposed to be used—therefore also resulting in the fact that the tenant will be able to earn enough funds to pay the landlord the rent!
The types of provisions this clause actually outlines varies, but can range from defining how much staff must be employed in the space, how much stock can be on the premise, and the sort of operational hours and logistics that must be met at the property.
Three reasons why a landlord consider having a continuous operation provision
While this is not a mandatory provision for commercial leases, it is actually pretty standard. There are a few reasons why landlords would want to have a continuous operation provision.
1) If the business is a shopping mall, the chances are that there will be consistent customer traffic. Ensuring the space will be operational maximizes potential profits for both the business and the landlord.
2) If the business is smaller but surrounded by larger ones, the provision ensures that all businesses on the property will work together with similar expectations to share the customer traffic between them all.
3) If the landlord wants to have security with a range of potential breaches that could occur, the provisions provide the necessary mandates needed.
Navigating a continuous operation provision in a Covid-19 world
Right, so what are you to do if you realize you have continuous operation provisions to uphold but are not able to operate your business right now as a result of the pandemic? Well, welcome to the club!
Retail businesses of all shapes and sizes are dealing with navigating their way through these provisions during what is an already really difficult period of time. How are businesses expected to legally uphold these operation provisions while also legally upholding the new rules state governments have imposed on businesses?
It seems like retail businesses are in a lose-lose scenario—where they really can’t catch a break!
But the good news for retail businesses who have signed commercial leases is that there are likely some loopholes from these provision clauses that will help them get out of their legal obligation to operate.
Many commercial leases forgo provisions under extenuating circumstances and Covid-19 seems to fit the bill on this one! Seeking legal counsel or assistance can make a world of difference for retail businesses, as the experts around commercial leases can help guide businesses out of obligations that are now impossible to adhere by!
While retail businesses won’t be able to get out of everything the commercial lease mandates—such as paying rent—there is a range of other liabilities that will no longer be applicable to the retail businesses.
This is great news and hopefully provides a little bit of less stress to businesses facing challenging times and who are also in a massive fight for survival. We could all use a little bit of good news right now, and knowing that continuous operational provisions are not a must-do during a pandemic, retail businesses can breathe a bit easier.