A co-tenancy clause is a lease provision - almost exclusively found in retail leases - that gives a tenant the right to pay reduced rent or terminate the lease if certain anchor tenants or a minimum occupancy threshold in the shopping center falls below a specified level. The clause recognizes that a tenant's sales volume depends heavily on the foot traffic generated by key neighboring tenants.
By Angel Campa, Founder · Updated March 2026
For retailers, the presence of anchor tenants like a major grocery store, department store, or national brand can account for 30%–60% of in-store foot traffic. When anchors vacate, in-line tenants can see immediate sales declines of 20%–40%, yet remain obligated to pay full rent under a standard lease. Co-tenancy clauses are one of the most financially powerful tenant protections available in retail leases, and their absence is a material risk factor for any retailer negotiating a new lease or acquiring a portfolio.
Identify specific anchor tenants by name and require that replacement tenants be of comparable size and caliber within a defined cure period (typically 12–18 months). Negotiate a two-tier remedy: first, an interim rent reduction (e.g., to percentage rent only or 50% of base rent) while the co-tenancy condition is being cured, and then a termination right if the condition persists beyond the cure period. Push for broad occupancy triggers (e.g., 80% of GLA occupied) rather than relying solely on named anchors, which provides protection against widespread vacancy even without a single anchor departure.
Named anchor co-tenancy (triggered by departure of specific retailers), occupancy-based co-tenancy (triggered when overall center occupancy falls below a percentage threshold), and hybrid clauses combining both. Remedies vary from percentage-rent-only periods to full termination rights. Some leases include "dark anchor" provisions that trigger even if the anchor space remains leased but the tenant stops operating.
Lextract extracts these fields directly from your lease PDF when this clause is present:
Exclusive Use Clause
An exclusive use clause grants the tenant the sole right to operate a specific type of business or sell particular products within the shopping center or building.
Kick-Out Clause
A kick-out clause is a lease provision that grants the tenant the right to terminate the lease early if sales revenue fails to reach a specified threshold within a defined measurement period.
Go-Dark Clause
A go-dark clause gives a tenant the contractual right to stop operating its business and cease all commercial activity at the leased premises while continuing to pay rent, without being in default of the lease.
A co-tenancy clause activates when a named anchor tenant vacates or ceases operations (named anchor co-tenancy), or when overall center occupancy falls below a specified threshold such as 70% to 80% of gross leasable area. Some clauses include "dark anchor" provisions that trigger even if the anchor space remains leased but the store stops operating. The departure of anchors like grocery stores or department stores can reduce in-line tenant foot traffic by 30% to 60%.
Tenants should negotiate a two-tier remedy: first, an interim rent reduction to percentage rent only or 50% of base rent during a cure period of 12 to 18 months. If the co-tenancy violation persists beyond the cure period, the clause should grant a full termination right allowing the tenant to exit without penalty. Push for broad occupancy triggers (80% of GLA occupied) in addition to named-anchor triggers to protect against widespread vacancy even without a single anchor departure.
If a co-tenancy clause reduces rent from full base rent of $5,000 per month to percentage rent only during an 18-month cure period, and the tenant generates $300,000 in annual sales with a 6% percentage rent rate, the tenant pays $1,500 per month instead of $5,000 - a savings of $3,500 per month or $63,000 over 18 months. Without a co-tenancy clause, the tenant would pay full rent regardless of anchor vacancies that devastate foot traffic and sales.
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