Lessons for Commercial Leasing from NFL Contracts

Trick-or-treating has come and gone and as the weather turns colder, the temperature rises on the NFL season. For fans of the game, casual or passionate, there is much attention paid to contracts and the huge sums of money that are spent on our modern national pastime. I thought it would be interesting to briefly examine NFL contracts, their parallels with commercial real estate leasing, and lessons that can be learned.

Commercial real estate leases and NFL contracts should be viewed as living, breathing documents that set out the rules of the road for an ongoing relationship between the parties. These agreements cannot simply be filed away and ignored after they have been negotiated and signed. Instead, the documents must be referenced frequently and fully embraced by everyone involved to optimize their ongoing rights, duties, and benefits. Framing contracts in this way informs the parties that it can be enormously helpful to take a collaborative approach in negotiations. In order for commercial real estate properties and NFL organizations to flourish, the parties need to think of each other as partners and not as adversaries. The reputation of each side will live on long after the agreement has been inked.

A prime example of this framework is seen with percentage rent in commercial real estate leases and revenue sharing in the NFL. When a tenant’s success is enhanced by their location in an attractive retail environment cultivated by the landlord, then both parties share in the tenant’s sales success. Similarly, when the NFL generates eye-popping television contracts by showcasing excellence on the field, teams and players share in the resulting revenue. These contractual provisions align the interests of both parties to work towards a common goal.

Another overlapping concept in these agreements are termination rights. Landlords and tenants frequently have early termination rights, for a number of reasons or for no reason at all. Similarly, teams can typically terminate a player’s contract early and players can demand a trade to another team. Termination rights are negotiated to protect each party in the event that the contract does not meet their bargained for expectations. This dynamic creates motivation to foster a contractual relationship that is sustainable and mutually beneficial, again reinforcing the collaboration necessary for successful leases and NFL contracts.

As we lounge on Sunday afternoons this winter to watch football and as we go shopping for the holiday season, let’s remember that the purpose of contracts is to strengthen relationships between people. 

 

To learn more about LeasePilot and get the latest on commercial real estate trends