Starring: Your Building
By Susan Fowler McNally
This article originally appeared in the July/August 2003 edition of Commercial Investment Real Estate magazine and is reprinted with the permission of Commercial Investment Real Estate magazine
If you own a building that has the “look” a television or movie production company is trying to portray, you can make use of unoccupied space by allowing them to film scenes at your property. While the per diem fees — usually $2,500 to $10,000 per day — may appear to be a windfall, they don’t take into account the sometimes staggering costs of repairing damage caused by film crews. To protect your building, consider the following aspects when drafting an agreement.
Contracts. A license agreement grants the production company access to, but not any interest in, the real estate. If the production company defaults, you can terminate the license immediately and avoid the lengthy eviction process.
Security Deposit. Expect the film crew to cause damage: Their heavy equipment can scrape floors and walls, and electricity and lighting cables can snag expensive finishes. The license fee may pale in comparison to the repair bill, so get a significant security deposit from the production company.
Reasonable Wear and Tear. A production company’s interpretation of reasonable wear and tear — such as scratches on pavers, oil stains on carpets, or ripped wall coverings — differs vastly from that of most office tenants, so avoid carving “reasonable wear and tear” out of the licensee’s repair obligations.
Utilities. Film crews routinely rent generators to provide the power they require to operate additional lights and air conditioning. To avoid being stuck with huge utility bills, make sure the contract clearly makes the licensee responsible for obtaining and paying all necessary services.
Building Image. A trailer or advertisement depicting your building as the scene of a murder may adversely affect future leasing. To avoid this, confirm that scenes are not potentially detrimental to your marketing program or that your building is not readily identifiable in the television show or movie.
Injunctive Relief. Virtually every production company insists that property owners waive all rights to injunctive relief, or the right to obtain a court order prohibiting the licensee from continuing to breach the contract. If you waive this right, consider insisting on a liquidated damages provision to protect against the filming of a scene that depicts the building owner’s name, the building’s name, or any readily recognizable portion of the building in a negative manner.
Out-of-Pocket Expenses. Make sure that you are reimbursed for the site coordinator’s fees, attorneys’ fees, and costs associated with security and cleaning, as well as all other out-of-pocket expenses.
Insurance. Request evidence that the production company is carrying proper insurance, and make sure you are covered as an additional insured on the policies. If the production company self-insures, confirm that it has substantial net worth and clarify that such a self-insurance program does not reduce your rights as an additional insured and does not diminish the waiver of subrogation rights and obligations in the license agreement.
Licensee Identity. As many production companies create separate entities for each television show or movie, ensure the license is personal to a creditworthy licensee; however, be prepared to acknowledge that the licensee may transfer the right to use the film to the television show or movie distributor.
Cure Period. Any notice of default and cure period (the time period after a notice of default is given that the licensee has to cure the default to avoid having the license terminated) should be very short: immediately, or at most, within an hour after notice.
Retakes and Re-Entry. Limit the time the production company can film retakes to three to six months after the original term expires (at the same per diem rate) and condition such re-entry on the space being available.
About the Author
Susan Fowler McNally is a partner at Gilchrist & Rutter in Santa Monica, Calif., where her practice focuses on real estate transactions, including purchases and sales; commercial leasing; financings; construction and design professional contracts; and asset management contracts. (310) 393-4000.
Copyright 2003 CCIM Institute. Reprinted with permission from Commercial Investment Real Estate magazine, Vol. XXII, No. 4. July/August 2003
“As seen in Commercial Investment Real Estate Magazine”
