co-tenancy clause

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Definition

A retail lease provision letting tenants break the lease or pay reduced rent if an anchor store closes or occupancy drops below a threshold. It's the commercial tenant's escape hatch from a dying mall.

Example Usage

When Macy's closed, the co-tenancy clause allowed smaller retailers to reduce their rent by 50% until a replacement anchor was found.

Origin

Emerged in shopping center leases during the 1980s-90s as tenant bargaining power increased

Fun Fact

Co-tenancy clauses became litigation goldmines during the retail apocalypse when anchor stores closed en masse.

Source: Commercial leasing and retail property terminology

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