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Co-leasing clause worth considering for commercial lease

On Behalf of | May 26, 2020 | Commercial Real Estate |

Many California shopping centers rely on the draw of their anchor tenants. As a result, many smaller businesses in shopping malls or centers may also rely on those tenants to obtain business due to the foot traffic generated by the bigger stores. Unfortunately, if an anchor tenant leaves a shopping center, the smaller stores could suffer. As a result, leasees may consider utilizing a co-leasing clause in their commercial lease.

A co-leasing or co-tenancy clause could help protect smaller businesses by essentially connecting their lease terms with the anchor store. For example, a smaller store could obtain a co-leasing clause that indicates that its rent would decrease or it would have the option of ending its rental agreement early in the event that the anchor store left the shopping center. The decrease in traffic the anchor store once generated could warrant a decrease in rent for smaller businesses.

Of course, small business owners looking to obtain such a clause may need to negotiate their lease terms. As a result, they need to know which type of co-leasing clause they want to utilize. It is also vital to include details about what could constitute a co-leasing failure, causing the clause to take effect.

A commercial lease can play an important part in a company’s operations. As a result, California business owners certainly want to ensure that their leases work to their advantage. Considering co-leasing clauses may be worthwhile, and discussing this option with knowledgeable attorneys is a smart move to make.