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A Tenant's Perspective on Co-Tenancy

By Glenn A Browne
March 27, 2007

In order to protect against a shopping center becoming less populated with retail department stores or so-called 'anchor' tenants, tenants will request, and frequently obtain, co-tenancy provisions in their lease documents. While the
co-tenancy provisions will vary from tenant to tenant, most co-tenancy provisions will at least protect the tenant from 'anchor' stores ceasing to operate (i.e., 'going dark') and from a certain percentage of 'in-line' tenants being closed for business. However, the co-tenancy provisions are often very vague as to how a landlord will be deemed to have cured a situation where an anchor store has closed for business. As a result, the following issues often are not addressed in the lease: 1) Does the entire anchor tenant space that has closed for business need to be leased and open for business in order to cure the co-tenancy condition; 2) Can the space previously occupied by the anchor tenant be occupied by a mixed-use of tenants in order to cure the co-tenancy condition; and 3) Are there any restrictions on the type of replacement anchor tenant that can open for business and cure the co-tenancy condition?

Amount of Space to Be Leased
To Cure a Co-tenancy Condition

On a very frequent basis these days, landlords are taking the position that not all of the space previously occupied by the original anchor tenant needs to be leased and open for business in order to cure a co-tenancy condition. Landlords are asserting the position that simply because a 200,000 square foot anchor tenant previously existed, such a footprint for a department store may be obsolete in current times, and an anchor tenant that occupies 150,000 square feet or less should serve to cure the co-tenancy condition.

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