REAL ESTATE
IN THE FASHION INDUSTRY
EXPANDING TO A GLOBAL MARKET
TABLE OF
CONTENTS
03 Introduction
04 10 Key Questions
20 Case Studies
22 Local Expertise, Global Presence
23 Key Contacts
02 | Real Estate in the Fashion Industry
INTRODUCTION
We get retail!
The retail sector is sensitive to and responds
quickly to consumer-driven economic conditions.
Changing consumer trends, lack of prime retail space
and often inflexible leases have all meant that times are
challenging for retailers. However these challenges have
also brought with them a wealth of opportunities to
the sector. To thrive, retailers must be able to draw on
real estate advisors who are routed in the sector and are
experienced in its many critical aspects. Like the retailers
we already act for, DLA Piper’s Real Estate team is fast
paced dynamic, commercial and deadline-driven.
We have the global network which is unmatched,
and combine this with the best local expertise and
relationships.
We understand your need to be commercial and where
necessary engage with our colleagues to ensure that all
the legal issues are taken into consideration ensuring
you get the best return on your investment. DLA Piper’s
Real Estate team and dedicated team of retail lawyers
stand for comprehensive, practical and solution-oriented
advice from a single source.
In the following pages we address some of the key
questions that are relevant when entering into a new
country or region but if appropriate we would be happy
to discuss these with you in more detail.
Jim Bauwens
Head of International Retail – Real Estate
We have an international team of real estate lawyers
dedicated to retail dealing with all international retail
transactional work, including comprehensive legal advice
on planning, development, environment, construction,
revitalisation, acquisition and divestment of all types of
retail properties, drafting and negotiation of leases and
complex development agreements, continuous legal
advice in the field of commercial tenancy law, property
and asset management, litigation, ratings advice, tax
planning and competition issues.
Our real estate lawyers have everything to help you
open the door in new countries to ensure you get the
right premises. We understand brand and the value of
the brand, especially when acquiring new premises or
re-negotiating leases. We understand the importance of
tenant mix around your location to safeguard your brand.
Changing consumer behaviour and the impact it has on
buying habits has an enormous impact on your shops
requirements. We can support you in ensuring that you
are able to adjust premises quickly and cost effectively to
respond to these demands, or to be able to dispose of
them if they no longer meet your needs.
www.dlapiper.com | 03
10 key QUESTIONS
Australia
Belgium
China
Is a trading
licence required
for a retail
operation?
No.
Yes, a socio-economic permit
is required for all net sales
areas above 400 sq. m.
Yes. Generally, there are
2 ways to do retail business
in China: (1) self-operated
stores, in which case the
company needs a retail
permit; and (2) cooperation
with shopping malls, in which
case the company need only
have a wholesale permit.
How is a new
retail business
normally set up?
Typically by acquiring a new
lease or taking over an
existing lease in a desirable
location.
Typically by acquiring a
new lease or taking over an
existing lease in a desirable
location.
Typically, by setting up
a trading company with
wholesale and retail permits
covering any administrative
offices as well as the retail
store(s) as branches.
Is it common to
pay a premium
to a landlord for
the right to take
over an existing
lease or business?
No. Such payments are, in
effect, illegal.
No. Such payments are, in
effect, illegal.
No. This is not common but
it is common to pay a deposit
(or earnest money) to a
landlord to secure premises
before a definitive lease is
entered into.
Does a special
legal regime apply
to retail leasing
or operation?
Retail property is governed
by specific legislation in each
state (eg Retail Leases Act
1994 (New South Wales)).
Yes, the Belgian Civil Code
was changed in 1951 when
a new section specifically
regulating commercial lease
agreements (retail leases) was
added.
No.
How long is a
typical new retail
lease?
5 years. All States except
Queensland require a
minimum of 5 years unless an
exemption is obtained from
the tenant.
9 years. A retail lease may
not be concluded for less
than 9 years. The tenant may
terminate the lease at the end
of each 3 year period.
There is no restriction on
common retail lease terms
but the maximum would be
20 years.
04 | Real Estate in the Fashion Industry
10 key QUESTIONS
Australia
Belgium
China
How common is
a turnover-based
rent?
It is common to have a
mixed rental (base rent plus
turnover rent).
In malls, in most cases,
the rent corresponds to a
percentage of the turnover
with a minimum guaranteed
rent. Outside malls turnover
rents are uncommon.
Very common for retail
businesses.
Does the level
of rent tend to
be fixed or will it
increase?
Rent normally increases
annually on each anniversary
of the commencement date
by either CPI or a fixed
percentage and is adjusted to
market rent at the start of
the option term.
In most cases the rent is
indexed yearly.
Rents will usually increase in
line with the market rent but
it is common for a lease to
limit increases to a maximum
percentage.
Is it normal for
a new tenant to
provide some
form of security
or guarantee to
the landlord?
Lease agreements usually
provide for a 3 or 6 month
guarantee in the form of a
deposit or a bank guarantee.
Personal guarantees are
sometimes also required.
Lease agreements usually
provide for a 3 or 6 month
guarantee in the form of a
deposit or a bank guarantee.
Yes – by paying security
deposit (which will be
refunded twice over if there
is breach by the landlord) or
earnest money which only
serves the purpose of showing
the tenant’s good will.
Do planning/
zoning restrictions
limit where a
retail operation
can be set up?
Yes. Real estate must be
authorized for general retail
use. The specific form of
retail use is not normally
restricted by law.
Yes. Real estate must be
authorized for retail use.
Yes. Retail is included in
“commercial use” in terms of
zoning land use rights.
Is it legal for a
landlord and
tenant to agree
to exclude
another retailer
from a location?
Leaving aside competition
issues that are unlikely to
apply in the case of one retail
location, this is legal. The
exclusion from a location of
a certain permitted use by
competitors is a common
practice.
Non competition clauses
pursuant to which a landlord
undertakes to a tenant not to
let premises to third parties
carrying on the same activity
as the tenant are valid in
most cases.
There is no specific
restriction. Leases are subject
to negotiation but general
rules on “unfair competition”
or “fraud” apply to leases.
www.dlapiper.com | 05
10 key QUESTIONS
Czech Republic
France
Germany
Is a trading
licence required
for a retail
operation?
Yes.
Yes, for premises which are
larger than 1,000 sq. m.
No.
How is a new
retail business
normally set up?
A new retail business is
usually set up by acquiring
a new lease or taking over
an existing lease. Strong
domestic and foreign retail
operators from time to time
acquire existing businesses or
franchise whole retail units.
Typically by acquiring a
new lease or taking over an
existing lease in a desirable
location.
Typically by entering into a
new lease or taking over an
existing lease in a desirable
location.
Is it common to
pay a premium
to a landlord for
the right to take
over an existing
lease or business?
No, but under the new Czech
Civil Code, compensation
may be payable to the
previous tenant.
It is quite rare. Usually, the
landlord will try to negotiate
a rent increase and/or an
extension to the term of the
lease.
No.
Does a special
legal regime apply
to retail leasing
or operation?
No. More generally, a special
legal regulation applies to
leases of non-residential
premises. This special
regulation will be removed
as of 1 January 2014 with the
new Civil Code coming into
force.
Yes, the commercial lease
statute provided in the Code
de commerce is applicable
and many provisions are
mandatory.
Standard German tenancy
law pursuant to the German
Civil Code applies. There is
no specific retail legislation
but the courts may control
the terms of any commercial
lease under the general
provisions of the law dealing
with standard terms and
may declare certain onerous
contractual terms void.
How long is a
typical new retail
lease?
Between 5 and 10 years.
Between 9 and 12 years.
Unless, it waives its right,
the tenant may terminate
the lease at the end of each
3 year period.
The initial term often is
10 years. In such cases
two options for the tenant to
extend (of 5 years each) are
common.
06 | Real Estate in the Fashion Industry
10 key QUESTIONS
Czech Republic
France
Germany
How common is
a turnover-based
rent?
Turnover-based rent is
common in large malls, where
the rent tends to be divided
into a minimum basic rent
plus an agreed percentage of
turnover. It is not common
to have turnover-based rent
outside malls.
In malls, in most cases,
the rent corresponds to a
percentage of the turnover
with a minimum guaranteed
rent. Outside malls turnover
rents are uncommon.
In malls, the rent will
frequently correspond to a
percentage of the turnover
with a minimum guaranteed
rent. Outside malls turnover
rents are not very common.
Does the level
of rent tend to
be fixed or will it
increase?
It is common for rents to be
indexed annually in line with
a relevant inflation index –
either the Eurozone or EU 27
HICP or the Czech Statistical
Office CPI.
In most cases the rent is
indexed yearly.
In most cases the rent
is indexed yearly, often
by reference to the
consumer price index
(Verbraucherpreisindex).
Is it normal for
a new tenant to
provide some
form of security
or guarantee to
the landlord?
New tenants usually provide
a security deposit amounting
to 3 or 6 months’ rent.
Parent company guarantees
are acceptable if the group
is reputable. Very strong
retailers – primarily leading
food retailers – may not have
to provide security.
Lease agreements usually
provide for a deposit equal
to 3 months rent. In addition,
in many cases, landlords
demand a bank guarantee
covering one year’s rent.
Lease agreements usually
provide for a guarantee
amounting to 3 months rent
including service charges,
in form of a deposit or a bank
guarantee.
Do planning/
zoning restrictions
limit where a
retail operation
can be set up?
Yes. Real estate must be
authorized for retail use.
Yes. Real estate must be
authorized for retail use.
Yes. Real estate must be
authorized for retail use.
Is it legal for a
landlord and
tenant to agree
to exclude
another retailer
from a location?
Such a provision may
breach competition law,
however each case should
be considered individually.
In reality, such agreements
are fairly common.
Non competition clauses
pursuant to which a landlord
undertakes to a tenant not to
let premises to third parties
carrying on the same activity
as the tenant are valid in
most cases.
Non competition clauses by
which a landlord undertakes
to a tenant not to let
premises to third parties
carrying on the same activity
as the tenant within a certain
radius are valid in most cases.
www.dlapiper.com | 07
10 key QUESTIONS
Hong Kong
Hungary
Italy
Is a trading
licence required
for a retail
operation?
No.
Yes. An operating permit
must be obtained from the
local municipality.
Yes.
How is a new
retail business
normally set up?
Typically by acquiring a
new lease or taking over an
existing lease in a desirable
location or by entering a
dealership agreement with
shopping mall landlord.
There is currently a high
vacancy rate in Hungary
in shopping malls and in
desirable city locations.
Start-ups normally involve
entering into a new lease.
Typically by entering into a
new property lease contract
or a “going concern” lease
contract (commonly used
in malls since “umbrella”
trade authorizations are
issued). On-street locations
may be acquired through
the assignment of existing
contracts from existing
tenants on payment of a
premium.
Is it common to
pay a premium
to a landlord for
the right to take
over an existing
lease or business?
No.
No.
Entry into desirable on-street
and other prime locations
could involve the payment of
a premium.
Does a special
legal regime apply
to retail leasing
or operation?
No.
Yes retail leases are governed
by the Civil Code and by
a special Lease Act which
provides quite a high level of
protection tenants’ interests.
Property lease contracts are
subject to the special regime
laid down by Law 392/1978.
Going concern lease contracts
are subject only to civil code
provisions.
How long is a
typical new retail
lease?
Between 3 and 7 years.
Currently not longer than
5 years with a break option
and an option to extend.
Property lease contracts
must have a minimum term
of 6 years, automatically
renewed for further periods
of 6 years unless one party
gives 12 months notice
that it will not renew (the
landlord’s right to refuse
renewal after the initial term
are limited). Going concern
lease contracts normally
have terms ranging from 5 to
15 years.
08 | Real Estate in the Fashion Industry
10 key QUESTIONS
Hong Kong
Hungary
Italy
How common is
a turnover-based
rent?
For retail leases, it is common
to have a mixed rental (base
rent plus turnover rent).
Currently rents are turnover
based in many places. Tenants
can easily avoid an obligation
to pay a minimum amount of
fixed rent.
Going concern lease
contracts usually provide for
both turnover based rents
and minimum guaranteed
fixed rents (subject to
adjustments in line with the
COL index). Property lease
contracts normally provide
for fixed rents, although
turnover based rents are not
prohibited by law.
Does the level
of rent tend to
be fixed or will it
increase?
Rents normally increase at an
agreed percentage every year
during the fixed term but are
adjusted to the open market
rent during any optional
extension term.
The rent tends to remain
the same or possibly decline
slightly, due to the high
vacancy rate.
Rents are usually subject to
annual adjustment based on a
certain percentage (depending
on the lease term, from 75%
to 100%) of the change in the
cost of living index during
the previous year.
Is it normal for
a new tenant to
provide some
form of security
or guarantee to
the landlord?
The rental deposit for
retail tenants is normally
equal to three months’
rental, management fee,
air-conditioning fee and one
quarter of the government
rates and/or government rent
and can be paid by way of
cash or bank guarantee.
Landlords typically ask for
a security deposit or bank
guarantee for three months
rent and service charge
plus VAT.
Yes, although Italian law limits
the amount of cash deposits
to 3 monthly instalments of
rent. Bank guarantees are
normally requested. Parent
company guarantees might
be accepted by landlords
only for leading international
operators.
Do planning/
zoning restrictions
limit where a
retail operation
can be set up?
Yes. Leased property must
be permitted for general
commercial use. The specific
form of retail use is not
normally restricted by law.
No.
Yes. Zoning and other public
laws restrict the setting up of
retail operations (or require
filing/permits to be obtained).
Is it legal for a
landlord and
tenant to agree
to exclude
another retailer
from a location?
This may be against
competition law but the law
in this area came into effect
only in 2013 and it is not yet
clear what effect it will have.
This is legal. The exclusion
of a certain group of
competitors from a location
is a common practice.
Yes.
www.dlapiper.com | 09
10 key QUESTIONS
Netherlands
Norway
Poland
Is a trading
licence required
for a retail
operation?
No.
No trading permits are
required specifically to
establish a retail operation.
No.
How is a new
retail business
normally set up?
Typically by acquiring a
new lease or taking over an
existing lease in a desirable
location.
A new business is normally
set up as a new limited
liability company which takes
a new lease, or takes over an
existing lease agreement.
In general by acquiring a new
lease or by acquiring the real
property where a retail mall is
to be developed in a desirable
location. Franchise networks
are being developed major
retailers who are already in
the market.
Is it common to
pay a premium
to a landlord for
the right to take
over an existing
lease or business?
No. It is more common to
pay a premium to the existing
tenant.
No, this is not common.
No.
Does a special
legal regime apply
to retail leasing
or operation?
A special regime applies to
retail leases and leases of
hotels. It is not possible to
include terms in leases of
retail property which differ
from those laid down by
regulations to the prejudice
of the tenant without the
approval of the court.
There is no specific legislation
other than that governing all
commercial leases.
No.
How long is a
typical new retail
lease?
5 years plus 5 years.
Normally 10 years with an
option for additional 5, but
anything between 5 and
10 years is not unusual.
Typically 5 or 10 years.
How common is
a turnover-based
rent?
Turnover-based rent is
common.
This is quite common
especially in malls, but subject
to a minimum rent level.
Very common. Rent in malls
is usually partly basic rent and
partly turnover-based rent.
Does the level
of rent tend to
be fixed or will it
increase?
In most cases the rent is
indexed yearly. In addition
both parties have the right to
ask for a new rent to be set
at the end of the first rent
period and again 5 years later.
If the rent is not turnover
based, it will always be fixed
but subject to adjustment
annually in line with the
Consumer Prices Index.
It is common practice for
leases to include provisions
effecting yearly indexation of
the rent.
10 | Real Estate in the Fashion Industry
10 key QUESTIONS
Netherlands
Norway
Poland
Is it normal for
a new tenant to
provide some
form of security
or guarantee to
the landlord?
Yes, a bank guarantee of
3 months rent or a parent
company guarantee.
Yes, all tenants are expected
to provide either a guarantee
or a deposit for a minimum of
6 months’ rent.
Yes, it is standard practice
for landlords to require
some form of security,
typically for 3 months’ rent.
Bank guarantees, deposits,
or a notarial deed involving
voluntary submission to
enforcement proceedings are
all fairly common.
Do planning/
zoning restrictions
limit where a
retail operation
can be set up?
Yes. Real estate must be
authorized for retail use.
Yes, but in general this is
mostly an issue affecting
malls. Any area in which retail
business is to be operated
must be appropriately zoned.
If there is a local zoning
plan which governs the
area, any investment should
be conducted strictly
in accordance with the
provisions of the zoning plan.
If the area is not covered by
a zoning plan the investment
may be commenced on the
basis of a zoning decision.
Is it legal for a
landlord and
tenant to agree
to exclude
another retailer
from a location?
This may be against
competition law, but for
an initial 7 year period
it is permissible to make
restrictive arrangements
regarding the use of the units
in a shopping centre.
A non-compete clause is
quite common in malls and is
legally permissible.
Many retail leases include
provisions prohibiting
landlords from leasing
other units in the same
mall to competitors of the
tenant or retailers offering
similar merchandise. These
provisions have become
standard in large malls, but
must always be assessed from
an anti-trust perspective.
www.dlapiper.com | 11
10 key QUESTIONS
Portugal
Romania
Russia
Is a trading
licence required
for a retail
operation?
In general terms, no trading
permit is required for a retail
operation. However, specific
activities require may require
a permit (e.g. pharmacies).
All companies need to be
registered and authorized in
order to carry on commercial
activities, including retail
operations. Depending on the
specific retail sector, additional
permits/authorizations may be
required.
No.
How is a new
retail business
normally set up?
Normally by acquiring a new
lease or sublease in a desirable
location. Purchasing real
estate or acquiring an existing
business is also possible.
Typically, a new retail business
is set up by acquiring a new
lease in a desirable location.
Generally a new retail
business is set up by
establishing a new company
and acquiring a lease.
Franchising is also sometimes
used. However, it has become
more common for luxury
brands operate directly.
Is it common to
pay a premium
to a landlord for
the right to take
over an existing
lease or business?
No. It is only permissible
to pay rent in advance for
a period not exceeding
3 months.
No. Usually, the Landlord
would negotiate a higher rent.
No. It is common to agree
new rental terms. Discounts
(rent-free periods) are
sometimes offered to reflect
the fit-out period during the
first year of the lease.
Does a special
legal regime apply
to retail leasing
or operation?
The general law regarding
urban leases is laid down
in the Civil Code. Legal
relationships in retail lettings
in malls or retail parks
are governed by atypical
contracts.
All types of lease agreement
are governed by the
Romanian Civil Code which
generally provides for rules
and regulations that can be
contractually excluded by the
parties.
No.
How long is a
typical new retail
lease?
Normally between 5 and
10 years. If the parties do
not agree on a fixed term,
the lease is treated as for a
period of 5 years.
Generally, for anchor
tenants, lease agreements
are concluded for more than
10 years. In case of smaller
tenants, the usual term is
between 3 and 5 years.
Depending on the space, 5,
10 or 15 years.
How common is
a turnover-based
rent?
A turnover-based rent is
not common in commercial
leases. This type of rent is
only common in malls.
In malls, it is common for the
rent to be set as a percentage
of the turnover subject to a
minimum monthly guaranteed
rent.
The practice of turnover-based
rent existed in large shopping
centres before the financial
crisis of 2008. Now the
majority of landlords prefer to
operate on a fixed rent basis.
12 | Real Estate in the Fashion Industry
10 key QUESTIONS
Portugal
Romania
Russia
Does the level
of rent tend to
be fixed or will it
increase?
Rents normally increase
every year. Any rent review
must be in line with the legal
annual rate approved by
the government. However,
the parties may define other
ways to vary the rent in the
contract.
In most cases the rent is
indexed yearly, in line with
the Harmonized Index of
Consumer Prices. Sometimes
parties will agree on a fixed
increase in the rent, depending
on the term of the lease.
Generally rent is increased
yearly by 3 to 7 percent,
depending on the location.
Sometimes the CPI or
another similar index is used
for rent indexation.
Is it normal for
a new tenant to
provide some
form of security
or guarantee to
the landlord?
Yes, common security
includes:
Lease agreements usually
provide for a guarantee up
to the equivalent of 3 to
6 months’ rent in the form
of a bank letter of guarantee
or a cash deposit.
Normally landlords require
the payment of a “security
deposit” equal to between
3 and 6 months fixed rent.
Bank guarantees are less
common. Some landlords also
require parent guarantees
from newly incorporated
tenants.
■■
a guarantee (personal
responsibility assumed by a
third party)
■■
a deposit equal to around
3 to 6 months’ rent
■■
a bank guarantee equal to
around 6 months’ rent.
Do planning/
zoning restrictions
limit where a
retail operation
can be set up?
Yes, planning/zoning
restrictions may limit where a
retail operation can be set up.
The relevant urban plan will
prescribe the uses permitted
in a given area.
When the premises are
built, the real estate must
comply with the provisions
of general planning and
zoning regulations, which
may impose restrictions
on construction for retail
operations.
Yes, to the extent that
the building’s permitted
use must be suitable for
retail purposes. Planning/
zoning restrictions are
generally applicable to new
construction.
Is it legal for a
landlord and
tenant to agree
to exclude
another retailer
from a location?
This may be against
competition law.
Such exclusivity clauses may
give rise to competition
issues and a self assessment
should be carried out to
determine the actual effects
of such a clause on the
relevant market.
Such provisions are not
binding on landlords and
may entail liability on both
landlords and tenants for
violating anti-trust law.
However, we see such
provisions in lease agreements
involving “big box” retailers.
www.dlapiper.com | 13
10 key QUESTIONS
Spain
Sweden
Thailand
Is a trading
licence required
for a retail
operation?
No.
No.
No, unless the lease is
entered into by a person or
foreign entity not meeting
the minimum capital
requirements under the
Foreign Business Act.
How is a new
retail business
normally set up?
Typically by acquiring a
new lease or taking over an
existing lease in a desirable
location.
Typically by acquiring a
new lease or taking over an
existing lease in a desirable
location. Franchising of whole
retail units is relatively rare
as is acquiring an existing
business.
By acquisition of a new lease
or taking over an existing
lease. A business may often
purchase land freehold when
setting up, but foreign owned
businesses may be restricted
from owning land.
Is it common to
pay a premium
to a landlord for
the right to take
over an existing
lease or business?
No.
In prime locations this
may happen, but it is not
considered common practice.
Yes.
Does a special
legal regime apply
to retail leasing
or operation?
Lease agreements applicable
to commercial premises are
regulated by the obligations
agreed on by the parties and
also by the Spanish Urban
Leases Act (Act 29/1994
of 24 November) and the
Civil Code.
No.
No.
How long is a
typical new retail
lease?
The typical term in retail
is between 3 and 15 years.
subject to break options after
a fixed initial period.
Between 3 and 5 years.
3 to 15 years. The parties
typically opt for a 3 year term
with subsequent options to
renew – typically four options
– in order to avoid registration
and its associated costs.
How common is
a turnover-based
rent?
In malls it is quite common
to have a structure of
turnover rent with a minimum
guaranteed rent, or fixed rent
plus a turnover rent. Outside
malls turnover rents are
uncommon.
In malls it is common for
around 80% of the rent to
be at a fixed level with the
remaining 20% dependent
on turnover. Outside
malls turnover rents are
uncommon.
Not very common, though it
does exist.
14 | Real Estate in the Fashion Industry
10 key QUESTIONS
Spain
Sweden
Thailand
Does the level
of rent tend to
be fixed or will it
increase?
Yes, usually the rent is
adjusted every year in line
with the Spanish National
Consumer Price Index.
Market rent reviews are not
uncommon in commercial
lease agreements effective
from the fifth year onwards.
Rents normally increase every
year through indexation.
However formal rent
renegotiation normally takes
place at the end of the lease
period, ie every 3 to 5 years.
Rents typically increase every
three years. The average
increase ranges from 8% to
15%, and increases are often
pegged to market fluctuations.
Is it normal for
a new tenant to
provide some
form of security
or guarantee to
the landlord?
There is a legally mandatory
deposit equal to two months’
rent. Additional contractual
guarantees are also common,
generally in the form of a
first demand bank guarantee.
In some cases, a parent
company guarantee may be
acceptable instead.
Newly set-up retail
businesses are commonly
expected to provide some
form of security, such as a
parent company guarantee,
bank guarantee or deposit.
Yes. A security deposit of
three months is common for
a three year lease term.
Do planning/
zoning restrictions
limit where a
retail operation
can be set up?
Yes, the applicable planning
parameters govern the
implementation of retail use.
In addition, each region in
Spain has its own relevant
regulations.
Yes. Real estate must be
authorized for general retail
use. The specific form of
retail use is not normally
restricted by law.
Yes. Zoning restrictions will
limit the areas where a retail
operation may be set up.
Is it legal for a
landlord and
tenant to agree
to exclude
another retailer
from a location?
Yes, exclusivity clauses in
lease agreements for shopping
centres are very common.
Yes.
Yes, this is permissible so
long as Thailand’s competition
laws, specifically the Trade
Competition Act, are not
violated. As a general rule,
exclusivity arrangements
are fairly common in lease
agreements, but will often
depend on the parties’
negotiating strength.
www.dlapiper.com | 15
10 key QUESTIONS
Turkey
UAE – Abu Dhabi
UAE – Dubai
Is a trading
licence required
for a retail
operation?
Yes, an “operating permit”
must be obtained for each
retail unit from the relevant
municipality.
Yes, a commercial permit
is required. All companies
must register their trade
names and become members
of the Abu Dhabi Chamber
of Commerce and Industry
(ADCCI).
All companies are required
to have a trade permit
which sets out their licensed
activities.
How is a new
retail business
normally set up?
Typically by acquiring a new
lease or taking over an
existing lease in a desirable
location.
Commercial permits for
retail activities are usually
only available to local limited
liability companies. A local
partner is required to form
such an LLC and take a lease.
Distribution/agency/franchise
arrangements can be used.
The company will usually
acquire a new lease.
Assignments are relatively
uncommon in Dubai. The
company must then apply for
a trade permit at the Dubai
Department of Economic
Development.
Is it common to
pay a premium
to a landlord for
the right to take
over an existing
lease or business?
Yes. Especially for good
locations it is very common
to pay a premium either to
the landlord or the previous
lessee.
No.
No.
Does a special
legal regime apply
to retail leasing
or operation?
There is a special lease chapter
in the Turkish Obligations
Code, which regulates
commercial leases and
residential leases separately.
There are no specific
regulations apart from the
general law applying to leases
of commercial property.
There are no specific
regulations apart from the
general law applying to leases
of commercial property.
How long is a
typical new retail
lease?
Between 5 and 10 years.
We are seeing an increase
generally in the length of
retail lease terms. A tenant
could expect a term of
between 3 and 5 years in a
reputable mall.
We are seeing an increase
generally in the length of
retail lease terms. A tenant
could expect a term of
between 3 and 5 years in a
reputable mall.
How common is
a turnover-based
rent?
In malls, in most cases,
the rent corresponds to a
percentage of the turnover
with a minimum guaranteed
rent. Outside malls turnover
rents are uncommon.
In malls it is common for
90% of the rent to be
at a fixed level with the
remaining 10% dependant on
turnover. We have also seen
turnover rents apply where
the turnover exceeds the
base rent figures. Outside
malls, turnover rents are
uncommon.
In malls it is common for
90% of the rent to be at a
fixed level with the remaining
10% dependant on turnover.
Outside malls, turnover rents
are uncommon.
16 | Real Estate in the Fashion Industry
10 key QUESTIONS
Turkey
UAE – Abu Dhabi
UAE – Dubai
Does the level
of rent tend to
be fixed or will it
increase?
Rents normally increase every
year either at a contractually
agreed rate or in line with
Consumer Prices Indices.
Rents normally increase by
a fixed amount every year.
However, these are subject
to an annual capped increase
of 5%.
Rents normally increase by
a fixed amount every 3 to
5 years. However, these
increases are subject to
the rental index issued by
the Real Estate Regulatory
Agency.
Is it normal for
a new tenant to
provide some
form of security
or guarantee to
the landlord?
Yes, a cash deposit equal to
2 to 3 months rent is often
demanded. Bank letters of
guarantee are often accepted
by lessors, however parent
company guarantees are
unusual.
Retail businesses are usually
expected to provide a
security deposit of between
3 and 6 months’ rent. Parent
company/bank guarantees are
becoming more common.
Retail businesses are usually
expected to provide a
security deposit of between
3 and 6 months’ rent.
Do planning/
zoning restrictions
limit where a
retail operation
can be set up?
Yes. Real estate must be
authorized for business
use. The specific form of
retail use is not normally
restricted by law.
Yes, by the municipality
in relation to the original
construction and by the
Department of Economic
Development via the licensing
process. The Abu Dhabi
Urban Planning Council will
also consider large scale
planning applications.
Yes, the Dubai Municipality
determines the zoning
criteria for each area within
Dubai. The specific form of
retail use is not normally
restricted by law.
Is it legal for a
landlord and
tenant to agree
to exclude
another retailer
from a location?
This may be against
competition law but we see
such clauses in lease contracts
signed between large retail
chains and mall owners.
This may be against competition
law in the UAE. However, this
law only comes into full effect
on 23 August 2013 so it is
unclear what effect it will have.
This may be against
competition law in the UAE.
However, this law only comes
into full effect on 23 August
2013 so it is unclear what
effect it will have.
www.dlapiper.com | 17
10 key QUESTIONS
UK (Including Scotland)
Ukraine
USA
Is a trading
licence required
for a retail
operation?
No.
Yes, a trading patent as
provided for by the Ukrainian
Tax Code is required for
general trading operations.
Corporate filings are required
in each state where business
is carried on; local business
permits are required in
municipalities where stores
are located.
How is a new
retail business
normally set up?
Typically by acquiring a
new lease or taking over an
existing lease in a desirable
location. Franchising of whole
retail units is relatively rare
as is acquiring an existing
business.
Typically by acquiring a
lease or buying a retail real
estate facility, including the
development of a new facility.
Franchising is also widely used.
Typically by acquiring a
new lease or taking over an
existing lease in a desirable
location. Franchising of whole
retail units is relatively rare
as is acquiring an existing
business.
Is it common to
pay a premium
to a landlord for
the right to take
over an existing
lease or business?
No. Such payments are, in
effect, illegal. In the rare cases
where it would be possible
one would expect the annual
rent to be discounted.
No, it is uncommon and,
in fact, illegal.
No.
Does a special
legal regime apply
to retail leasing
or operation?
No.
There are no specific
regulations apart from the
general law applying to leases
of commercial property.
No.
How long is a
typical new retail
lease?
Between 5 and 15 years.
A typical lease may be short
term (1 year to 2 years and
11 months), not requiring
notarization or registration
or long term – from 3 years
upwards (but normally 10 to
20 years). Long term leases
require notarization and
registration and thus are not
commonly used.
Between 5 and 15 years.
How common is
a turnover-based
rent?
In malls it is common for
around 80% of the rent to
be at a fixed level with the
remaining 20% dependent
on turnover. Outside
malls turnover rents are
uncommon.
Although the status of
turnover based rent is
doubtful under Ukrainian law,
it is commonly used in leases
of retail premises in malls.
Typically there will be some
fixed rent component plus a
variable proportion calculated
on the basis of unit sales.
18 | Real Estate in the Fashion Industry
10 key QUESTIONS
UK (Including Scotland)
Ukraine
USA
Does the level
of rent tend to
be fixed or will it
increase?
Rents normally increase
every 3 to 5 years in line with
market rent levels.
Usually part of the rent is set
at a fixed amount while part
may be reviewed from time
to time (where pre-agreed
by the parties, eg subject to
currency fluctuations).
Rents normally increase
every 3 to 5 years in line with
market rent levels.
Is it normal for
a new tenant to
provide some
form of security
or guarantee to
the landlord?
Newly set-up retail businesses
are commonly expected
to provide a deposit equal
to around six months’ rent.
Where the new operation
is a subsidiary of an existing
substantial parent, a parent
company guarantee may be
acceptable instead. Bank
guarantees are unusual.
Yes. Tenants are usually
required to provide a deposit
equal to 2 or 3 months’ rent.
Bank guarantees and parent
company guarantees are
rarely used.
Newly set-up retail businesses
are commonly expected
to provide a deposit equal
to around six months’ rent.
Where the new operation
is a subsidiary of an existing
substantial parent, a parent
company guarantee may be
acceptable instead. Bank
guarantees are unusual.
Do planning/
zoning restrictions
limit where a
retail operation
can be set up?
Yes. Real estate must be
authorized for general retail
use. The specific form of
retail use is not normally
restricted by law.
Yes, when land is allocated
for the construction of retail
real estate and throughout the
life of such facilities. Existing
real estate must be generally
authorized for retail use.
Yes. Real estate must be
authorized for general retail
use. The specific form of
retail use is not normally
restricted by law.
Is it legal for a
landlord and
tenant to agree
to exclude
another retailer
from a location?
This may be against
competition law but the law
in this area came into effect
only in 2011 and it is not yet
clear what effect it will have.
It is common market practice
to include non-compete
clauses in lease agreements.
This, however, may be
found to be a violation of
competition law and subject
to significant penalties.
Yes. It is fairly common to
include provisions excluding
other directly competitive
retailers from the same mall.
www.dlapiper.com | 19
CASE STUDIES
Levi Strauss
We are the sole legal providers of
real estate services to Levis across
Europe, taking instructions on their
large flagship retail portfolio as
well as their office, distribution and
logistics requirements. The key to
our appointment was our ability
to understand the needs of retailers on
developments, the need to maintain
trade and footfall and to protect the
value of the brand.
Burberry
We represent Burberry in the UK, Belgium, the
Netherlands, Czech Republic, Hungary, Hong Kong,
Russia, Croatia, Poland, Serbia, Slovakia and Australia on
its real estate and other legal requirements. Our work in
the UK includes the acquisition of stores, relocation to its
new head office and disposals of surplus property.
20 | Real Estate in the Fashion Industry
L K Bennett
We have acted for L K Bennett across several
jurisdictions including helping to manage
their expansion into continental Europe.
Our Real Estate work has included advising on
leases of stand-alone stores and concession
agreements in shopping centres and airports.
We have also advised on franchise agreements,
have drafted country-specific terms and
conditions and have provided training on
country-specific employment law.
www.dlapiper.com | 21
LOCAL EXPERTISE,
GLOBAL PRESENCE
DLA Piper’s office locations
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22 | Real Estate in the Fashion Industry
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For more information
To learn more about DLA Piper please visit www.dlapiper.com or contact:
EMEA
Olaf Schmidt
Partner, Milan
T +39 02 80 618 504
M +39 335 54 56 586
olaf.schmidt@dlapiper.com
Jim Bauwens
Partner, Antwerp
T +32 3 287 2837
M +32 494 57 15 34
jim.bauwens@dlapiper.com
Tom O’Grady
Partner, Dubai
T +971 4 438 6322
M +971 50 640 0019
tom.o’grady@dlapiper.com
ASIA-PACIFIC
Susheela Rivers
Partner, Hong Kong
T +852 2103 0760
M +852 6384 2200
susheela.rivers@dlapiper.com
Les Koltai
Partner, Sydney
T +61 292 868 544
M +61 408 900 344
les.koltai@dlapiper.com
Jane Baddeley
Partner, Melbourne
T +61 392 745 835
M +61 418 554 551
jane.baddeley@dlapiper.com
US
Jay Epstien
Partner, Washington
T +1 202 799 4100
M +1 202 262 6032
jay.epstien@dlapiper.com
Anita Agajanian
Partner, Boston
T +1 617 406 6058
M +1 617 549 2724
anita.agajanian@dlapiper.com
Visit www.dlapiperREALWORLD.com – DLA Piper’s guide to international real estate
www.dlapiper.com | 23
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