Site Control For Automobile Dealerships in the 21st Century

This article is the first in a trilogy of articles regarding site control.

An understanding of site control sometimes referred to as “point protection,” is important with respect to the dealer’s intended use for the property and becomes extremely important if a dealership proves not to be successful. [A “point” is a location where a manufacturer or distributor (hereinafter referred to jointly as “manufacturer” or “factory”) either has or wants a dealership.]

As explained below, there are many forms of site control. There is a distinction, however, between site control as it applies to non-dealership real property and site control regarding new car dealerships. Because of the many forms and because of the distinction with respect to car dealerships, it would be wrong to generalize that site control per se is either good or bad. Each case must be assessed individually.

A right of first refusal almost always chills a land owner’s ability to sell the real estate. The theory being that a prospective third party purchaser would not be as easily inclined to spend the time, money and energy required to compose an offer for real estate, knowing the tenant has the right to accept the offer and obtain the benefit of the third party’s research and bargaining when the optionee exercises his option.

In the case of a sale of an automobile dealership, that statement is rarely true.

BACKGROUND

While site control had been around for decades, the surge in real estate prices, in the 1970s and 1980s saw many metropolitan dealers selling their facilities for what seemed then to be astronomical sums. Properties that dealers purchased, or constructed for a few hundred thousand dollars in the 1940s, 50s and 60s were, by the late 1970s, selling for millions.

As real estate prices escalated, so did the cost of replacing the facilities and manufacturers were finding it difficult to obtain dealers to invest in many of those areas.

Consequently, by the mid 1980s site control began to appear for the first time in Sales and Service Agreements of the factories.

For a short time back in the 1980s, there was a conflict between dealers and Chrysler Realty Corporation (Realty) when Chrysler sold Realty to an independent, non-automotive company, ABKO.

The situation in the 1980s was an anomaly and since Chrysler repurchased Realty from ABKO, all of the factory realty companies have been owned by the factories, whose goal is to support their dealers.

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