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Shopping centers and co-leasing clauses in commercial leases

On Behalf of | Jun 25, 2020 | Commercial Real Estate |

Retail owners operating in the same Orange County location often have a symbiotic relationship. The success of one or two stores, usually the larger anchor tenants, will usually affect the success of the smaller ones, and the smaller stores may drive more traffic into the larger ones. For this reason, many commercial leases include co-leasing clauses for tenants in shopping centers.

Co-leasing clauses provide tenants with the option of terminating the lease or receiving a reduction in rent under certain conditions. For instance, if an anchor tenant leaves a shopping center, a tenant with this particular clause may look for a new space or not pay as much in rent. This is one of the three types of this clause that is often referred to as an “occupancy” co-leasing clause.

The two other types of clauses cover a tenant before even moving into the space. A “pre-leasing” clause allows a potential tenant to change his or her mind and go elsewhere if not enough tenants make commitments prior to a certain date. The other type is an “opening date” clause that allows a tenant to back out of an agreement if not enough other stores have opened prior to a particular date.

It is not difficult to imagine that property owners may not be exactly amenable to co-leasing clauses. They build shopping centers in order to make a profit and have tenants in them, and giving tenants a way out may not be their first option. For this reason, it would most likely be beneficial to bring an Orange County attorney into the negotiations in order to work toward a lease that provides a retail tenant with as many protections as possible.