Definition of Co-tenancy clause:
A co-tenancy clause in retail lease contracts allows tenants to reduce their rent if key tenants or a certain number of tenants leave the retail space. A large or key tenant is a big draw for traffic, especially in malls, and is often one of the major reasons a tenant chooses to locate in a specific mall. A co-tenancy clause provides the tenant with some form of protection in the form of reduced rent to compensate for the loss of traffic.
Co-tenants are typically the anchor tenants in a mall. They are the large, popular stores that attract increased traffic that spills over to other stores in the same location. In times of economic stress, when some retailers are forced to close outlets to shave costs, landlords usually end up losing a lot of revenue. Exercising co-tenancy clauses further amplifies the loss of revenue as remaining tenants demand a reduction in rent, the stress of which could ultimately lead to bankruptcy.
A provision contained in a shopping mall lease that provides for a remedy for a tenant in the form of a rent reduction or a release from lease obligations should a major anchor tenant cease operations or move from the mall.
Meaning of Co-tenancy clause & Co-tenancy clause Definition