What is a co-tenancy clause, and what happens if the anchor store in my shopping center closes?
The short answer
A co-tenancy clause ties a tenant's rent obligation — or right to terminate — to the continued presence of specific tenants (typically anchor stores or a minimum level of occupancy) in the shopping center. If a named anchor closes or the center's occupancy falls below a threshold, a co-tenancy clause may allow the tenant to pay reduced rent, convert to percentage rent, or terminate the lease after a cure period. The protection offered depends on how specifically the clause names the trigger tenant or defines the occupancy threshold, and how long the landlord has to cure before the tenant's remedy kicks in. Vague co-tenancy provisions are frequently disputed. Scan your lease to see whether a co-tenancy clause exists and what it specifically protects before you sign.
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What a co-tenancy clause usually does
A co-tenancy clause makes part of the tenant's rent obligation or lease continuation contingent on the presence of specified co-tenants — typically a named anchor store or a minimum occupancy percentage for the center. When the trigger condition is breached (anchor closes, occupancy drops below threshold), the clause typically provides a remedy period in which the landlord can cure the condition (re-let to a comparable anchor) and, if not cured within a specified period, gives the tenant a rent reduction right or a termination option.
A commonly seen structure: if a named anchor closes and the landlord does not replace it with a comparable anchor within 90 to 180 days, the tenant may pay a reduced rent (sometimes expressed as a percentage of gross sales in lieu of fixed rent) for a defined cure period, after which a termination right arises. The specificity of the anchor's name, the comparability standard for a replacement, and the cure period length all determine how protective the clause is in practice.
Why people worry
Major anchor store departures — from large retail chains and restaurant groups — have been a recurring feature of commercial real estate since the mid-2010s and remain a live concern. A small tenant in a shopping center whose traffic depended on an anchor's draw can see sales drop substantially after the anchor closes. A co-tenancy clause is the contractual tool that ties the rent obligation to that traffic relationship. Without one, the tenant continues paying full rent regardless of changed conditions.
What to look for in your lease
- Whether a co-tenancy clause exists and what specific tenants or occupancy levels it covers.
- The cure period the landlord has before the tenant's remedy kicks in — and what counts as a comparable replacement.
- Whether the remedy is rent reduction, percentage rent conversion, or a termination right — and whether a termination right requires additional notice.
- How 'occupancy' is defined — gross leasable area, number of open tenants, or a weighted measure.
- Whether the clause applies during the initial term, renewal periods, or both.
Questions to ask before signing
- Ask the landlord to confirm whether a co-tenancy clause is included and what its current trigger tenants are.
- Ask the other party to clarify the cure period and what qualifies as a comparable anchor replacement.
- Confirm whether current anchor tenants have long-term leases or are near their own expiration.
- Consider having the lease reviewed to assess whether the co-tenancy clause is sufficiently specific to be enforceable as written.
Why scan instead of guess
The general rule tells you the baseline. Your lease tells you what you’re actually being asked to sign — and the wording is what binds. Dang reads the document and flags the clauses worth reviewing, in plain English.
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Common questions
Do all shopping center leases include co-tenancy clauses?
No — co-tenancy clauses are negotiated terms, not universal. Larger retail tenants with more leverage tend to obtain them; smaller tenants may need to ask specifically. Whether a landlord will agree to one depends on the market, the landlord's other tenant commitments, and the tenant's negotiating position.
What is a 'percentage rent' fallback in a co-tenancy clause?
A common remedy structure allows the tenant to pay a percentage of gross sales (often 5–8% is a commonly reported range) instead of fixed base rent when the co-tenancy condition is breached. This ties the tenant's rent obligation to actual traffic-driven revenue rather than a fixed amount independent of conditions at the center.
Can I leave immediately if the anchor store closes?
Typically not — co-tenancy clauses generally require a cure period during which the landlord can replace the anchor before the tenant's termination right arises. Leaving before that process runs its course may constitute a breach of the lease. The clause's cure period and termination notice requirements control the timing.
No account required · File deleted after analysis · Not legal advice. Dang reports contract findings in plain English — general information, not legal advice about your situation. For consequential decisions, consult a licensed attorney in your state.