Yoga studios, like other non-traditional use spaces, can have a positive impact for a center. A popular studio can bring not only revenue from the lease itself, but also increased foot traffic to a center at specific times during the week. However, before yoga customers (or yogis) start their “downward dog” poses, a number of important leases provisions should be reviewed and negotiated first.
Some yoga studios offer “hot” yoga classes that crank up the heat. Besides breaking the yogis’ sweat, these types of classes can put a toll on HVAC systems. Further, some studios operate in commercial space that may only provide HVAC during the work week for the whole building. For instance, a yoga class in the middle of August on a Saturday afternoon could be too hot for some yogis, meaning paying customers won’t show up. Knowing the standard operating hours for the HVAC system against the standard hours of the yoga studio can assist how the tenant can use the HVAC outside of standard operating hours without breaking its budget.
Further, it is essential to know who will handle the repairs and/or upgrades. Will it be the tenant or landlord, and will the tenant be taking the space “as is” or will HVAC be part of improvements? One win-win solution could be to negotiate the installation of a supplemental HVAC unit to allow the yoga studio control of its own temperature.
Yoga studios offer classes at certain designated times. The upside of this is that you can get a nice influx of foot traffic after class lets out, as customers leaving mill around the rest of your center to stop at the coffee shop next door or the pharmacy a few stores away.
However, that also means that a significant number of parking spaces in the lot could be taken at peak class hours. Discussing designated parking is key to ensuring a proper balance at the center.
Some yoga studios offer therapies that may be considered medical services, which may require compliance with federal and state laws. For example, the Health Insurance Portability and Accountability Act (“HIPAA”) protects the privacy of individual medical records. Ensure that your lease includes specific provisions to protect that staff do not violate HIPPA, by setting guidelines for protection of information.
In addition, be aware of the Stark Law and Anti-Kickback Statute. For instance, providing a value for referral customers or permitting percentage rent can trigger these violations, which will cost you penalties and fines.
Use and Zoning
This is an important question to determine from the start: what will the studio be used for? Is it simply yoga classes or will the studio also be selling merchandise, coffee, juices, smoothies, etc.? Confirming that the use does not violate other tenancies and/or land use, licensing and other laws is necessary to know before signing the lease.
For example, a yoga studio selling coffee and juice could violate a restriction that only permits the coffee shop in your center to sell java. In addition, zoning issues can arise, such as ADA compliance, obtaining Certificate of Occupancy and improvements. If it is determined that a variance, license, or other approval is required, who will be responsible to obtain it and when?
Yoga studios offer a real opportunity to balance the center with lease revenues and enhanced foot traffic. These are just a few issues to review and discuss when negotiating the lease. Careful review upfront can ensure a peaceful and profitable tenancy – Namaste.
— Thomas S. Onder is a shareholder and member of the Commercial, Retail and Industrial Real Estate, Litigation and Bankruptcy & Creditors’ Rights Groups of Stark & Stark. He concentrates his practice in the area of commercial litigation and is a member of ICSC, as well as former Chair of the ICSC PA/NJ/DE Next Generation Committee.
Adam J. Siegelheim is a shareholder and member of the Business & Corporate and Franchise Groups. His practice focuses on entity formation, financing, intellectual property, real estate, mergers and acquisitions, and insurance coverage matters.
Stark & Stark (www.stark-stark.com) represents major landlords throughout the country, including recently in the District of New Jersey, Southern District of New York, District of Delaware and Eastern District of Pennsylvania. For more information, please contact Thomas Onder at (609) 219-7458 or [email protected]. Adam Siegelheim can be reached at (609) 791-7003 or [email protected].