While much hospitality industry legal discourse centers around hotel contracts as opposed to convention center license agreements, the license agreements can actually be much more complex. And while reading convention center license agreements may be an effective substitute for taking a sleeping pill, it is important to “demystify” these contracts and focus on the key issues to consider when implementing such agreements.
At the outset, it is important to note that most convention centers are publicly owned buildings – some by the city, county or state – even though they are often managed by private management companies. This dynamic raises both business and legal issues. From a business standpoint, working with public entities can be challenging given government bureaucracy. From a legal standpoint, it is often true that public entities – such as a cities and counties – are restricted or prohibited from indemnifying another organization. As such, many meeting professionals ask in frustration, “Can I even negotiate a convention center license agreement?” The answer to that question is “Yes!” While non-economic provisions (such as indemnification) are often not negotiable, economic provisions such as license fees, concessions, etc. are negotiable.
The following is a checklist of items to review and consider with any convention center license agreement:
– Licensed Space, Dates and Times: It is important to verify all space, dates and times include move-in and move-out times. Often errors or differences arise regarding the space discussed during the site visit. It is also important to include a statement that the center cannot reassign any of the licensed space without the prior written consent of the group.
– License Fee: This is an area which is negotiable. Cities and convention and visitors bureaus frequently make offers to groups to win their business. Those offers come with heavy discounts to license fees and even license fee waivers. Sometimes the amount of discount is based on the amount of hotel rooms used in the city. Other times it may be based on the food and beverage spend at the convention center. It is important to ensure the language is clear on the fees. If fees are to be paid, often they are based on the square footage of the actual event space while space for meeting offices, for example, are not charged.
– Deposit and Payment Schedule: Most license agreements will require an advance deposit due either on or close to the signing date. Subsequent deposits may be due leading up to the date of the event. Often these deposit schedules are negotiable in terms of amounts and timing. Regardless, most centers require payment of the full license fee at least 30 days in advance of the event. This full prepayment is generally non-negotiable.
– Insurance requirements: Convention centers require robust insurance coverage for any groups using the space. Everything from general liability to auto liability and worker’s compensation insurance may be required. It is important to ensure the group’s coverage fulfills the agreement requirements in terms of types of insurance and coverage amounts. Centers will want to see proof of the group’s insurance in the form of a certificate of insurance. Further, centers will require that the group name the center as an “additional insured” on its policy. This means that the center is a covered entity under the policy just as the group is covered under the policy. Finally, many centers require that the group’s insurance include a “waiver of subrogation.” “Subrogation” is a legal term in which the insurance company can “step into the shoes” of the inured party and sue the wrongdoer. For example, you get into a car accident caused by another driver. Your insurance covers your claim and then your insurance company sues the driver who caused the accident to recover its losses. When there is a waiver of subrogation, the insurance company is giving up (waiving) its right to sue the wrongdoer. That will likely require an additional endorsement on the group’s liability insurance policy and may be at an additional cost.
– Indemnification: While I recommend indemnification be a part of every contract, in convention center contracts it is often difficult to get the center to agree to indemnify the group. It is likely the case, as mentioned above, that the center is publicly owned and therefore prohibited from indemnifying the group. Regardless, I recommend planners always ask for it anyway as some centers can offer the group a modified indemnification provision. Nothing ventured, nothing gained. It is also important to focus on the group’s obligation to indemnify the center if the group does something wrong to get the group sued. Usually there is an exception in
the event the center was negligent. It is important to review this exception and make edits so as to expand the scope of the exception whenever possible.
– Exclusive Services: Convention centers have many exclusive suppliers of goods and services. I put these service providers into two categories: safety and non-safety. The safety suppliers (e.g., rigging, electrical) are non-negotiable. The non-safety suppliers (e.g., audio visual, floral) are often negotiable. The key is to carefully review the list of exclusive suppliers and ensure none of these services conflicts with the group’s pre-selected suppliers. Also, centers often have exclusive suppliers of goods or souvenirs. For groups which do sell group-related merchandise such as books, apparel, etc., it is important to include an exception in the exclusive supplier provision which allows the group to conduct those activities at no additional charge.
– Food and Beverage: Food and beverage is usually provided by an exclusive supplier. For groups which host food-related shows, centers will often agree to include an exception to allow group exhibitors to distribute sample sizes of food and beverage. Further, some centers will require the group to commit to a food and beverage minimum in order to secure a discount to the rental fee. If this is included, it is important to carefully review the provision to make sure it reflects the group’s prior discussions with the center. Also, if the group is relying on sponsored or affiliate food and beverage functions at the center, the group must ensure this provision includes a statement that any food and beverage revenue generated by the group’s sponsors and affiliates shall be credited toward the group’s food and beverage minimum.
– Utilities: Centers will provide various utilities, including lighting, heating and cooling. For move in and move out days, the levels of such utilities will usually
be cut in half. I recommend including a provision which states that if there are any interruptions in utility service, the center will use its best efforts to correct such interruptions as soon as possible.
– Cancellation: Just as hotel contracts include cancellation fees, center license agreements do as well. If the group cancels the agreement for reasons other than
force majeure or construction (see below), the group will owe a cancellation fee to the center. Typically the sliding scale in these cancellation fee provisions does not have as many tiers as those in the hotel’s cancellation fee provision. It is important that the group be comfortable with the fee schedule. Many centers will negotiate on at least the date parameters of this provision. Also, if the provision does not already permit a refund if the center resells the space, I recommend groups make this request as most centers will agree to include this provision.
– Force Majeure: While most license agreements include a force majeure provision, these provisions typically only permit cancellation without lability if something happens to the center. They typically do not address the possibility that the group’s performance of the contract may be affected by a force majeure event. As such, the group must ensure they negotiate this provision to allow for cancellation if the group’s ability to perform the contract is affected. Most centers will agree t make this change but often the verbiage will vary. If the contract is cancelled for these reasons, the provision should provide that the center will refund all deposits and prepayments made to it by group.
– Construction/Renovation: Centers will often make improvements and expand or modify their space. That is great when it happens before the meeting, but when it is ongoing during the meeting, that is a problem. So it is important to agreement which requires the center to notify the group if they will be undergoing construction just prior to or during the group’s event. I recommend including a statement that the center and group will work together to resolve any issues relating to the construction at the center’s cost. Most importantly, though, the provision should address the contingency that if the group still believes the construction will affect its meeting, the group may cancel the contract without liability. This is often a contentious issue during a negotiation, but one which it is important to negotiate to ensure the group is comfortable with the language.
– Quiet Enjoyment: No one likes being interrupted, whether it is noise, odors or dust. This being the case, groups should work to include a provision in the license
agreement which ensures that it may have use of the space without such interruptions. It should also state that if the group’s use is interrupted, the center will respond to the issues right away and resolve the concern.
– Rules and Regulations: Most convention centers have very detailed rules and regulations or guidelines. Typically these documents contain the specifics of what the group can/cannot do in terms of set up, décor, etc. These rules and regulations are usually attached to and referred to in the license agreement. It is important that the group review a copy of these rules and regulations and make sure that they meet with the approval of the group (or its decorator).
– Damage and Repairs: License agreements will provide that if the group damages the center (beyond normal wear and tear), the group is responsible for the cost of repairing the damage. I recommend trying to insert the word “reasonable” before the word cost to ensure that the cost of the repair is not excessive.
-Right of Access: Most license agreements will include the right of access for center personnel. I recommend including a statement that the center’s access will not unreasonably interfere with the group’s use of the space.
– Removal of Persons: Most license agreements permit the center to remove persons who are disruptive and not obeying the rules. Because the group could be sued for injuries relating to the center’s aggressive removal of a person, I recommend including the phrase “with reasonable force” alongside the word “removal.”
– Damage or Loss of Property: Centers will typically include a provision in the license agreement that they are not liable for damage to or loss of property of the group and its exhibitors no matter how caused. I recommend trying to modify this statement to add “unless such damage or loss is caused by the center, its employees and contractors.”
– Security: Centers will require groups to have security. Often the levels of security are determined at the center’s sole discretion. My recommendation is to build in a statement that the center and group will mutually agree on the level of staffing or that, at a minimum, the center will discuss such levels with the group first.
– Technology: Technology has become an essential component of any facility contract these days. If the center has made a commitment in terms of wireless internet service, I recommend adding this to the contract and addressing the possibility that the service may not be functional or may have interruptions. In such event, the center should work to correct the problem immediately.
– Housekeeping: Often housekeeping is provided by an exclusive supplier. The license agreement should include a statement as to the frequency of cleaning and maintenance and the quality of the service.
– Choice of Law and Forum: Most license agreements specify that the law of he state in which the center is located will govern any disputes and that such disputes will be heard only in courts located in the county of the center.
– Prevailing Party Attorney’s Fees: Often license agreements will include a provision that the prevailing party in any dispute can recover its attorney’s fees and
costs from the non-prevailing party. This is just a nice way of saying that the loser pays the winner’s attorney’s fees and its own. I recommend checking with the
group’s “legal eagle” to determine whether they would like to include this provision. When I make requests to have this provision removed, most centers will be open to the discussion.
As you can see from the above, there are lots of nuances within center contracts and lots of variations of the license agreement. Using this checklist as you
review (try to stay awake) a license agreement will help to frame any comments or questions you may have to the agreement.
Barbara Dunn O’Neal is a Partner with the Associations and Foundations Practice Group at Barnes & Thornburg where she concentrates her practice in
association law and meetings, travel and hospitality law. Barbara can be reached at (312) 214-4837 or barbara.dunn@ btlaw.com.
This article shall not be considered legal advice. In all cases, groups should consult their legal counsel.
©Copyright 2017. Barbara F. Dunn O’Neal, Esq., Barnes & Thornburg LLP. All rights reserved under both international and Pan American copyright conventions. No reproduction of any part may be made without the prior written consent of the copyright holder.