Reciprocal Easement Agreement Commercial Real Estate

2. Construction and architecture compatibility. The REA generally provides that the developer will provide for all on-site and off-site improvements, which include the shopping centre, as well as improvements relevant to buildings located on the developer`s property. The major retailer will be responsible for the construction of the retail building. As a general rule, the REA requires each party to verify and approve each party`s work plans and specifications, creating architectural compatibility for all construction work in the mall. In addition, the REA generally provides that each party develops its improvements according to an approved construction schedule for both parties. The REA, or a separate development agreement, will require the major retailer to reimburse the developer a reasonable portion of the costs incurred by the developer to build the upgrades to the mall on and off site. The purpose of the REA agreement is to grant the right of use to the co-owners of the property, but not the property. The aim is to develop the common good and ensure that the benefits of such commercial use accrue to the co-owners of the property. These agreements ensure that the development, maintenance and operation of the property proceed smoothly. These agreements are concluded against both residential and commercial real estate, but especially for the development of shopping malls.

A mutual facilitation agreement – REA agreement is required if two or more owners of adjacent land decide to jointly develop a commercial property. In the event that more than one owner is interested in developing a shopping mall, the most common scenario is that one of the owners is a developer and the other owner is a large retailer (z.B. Target or Wal-Mart) in that mall. Often, the developer will lease part of the property to the large retailer, in which case an REA is not required as the lease provides for the construction and operation of the shopping centre. However, if the large retailer wishes to acquire part of the property, the developer and the large retailer must complete an REA.