Co-tenancy Clauses Can Cause Headaches in Resolving Lifestyle Centers

Co-tenancy Clauses Can Cause Headaches in Resolving Lifestyle Centers

For much of the last decade, lifestyle centers were all the rage among developers. But even at the height of their popularity, there was a looming concern about the structure of their leases and the widespread use of co-tenancy clauses.

Co-tenancy clauses are provisions under which retail tenants are granted concessions if one or more tenants in a center leave or the project goes dark. Leases at regional malls and grocery-anchored shopping centers typically feature co-tenancy clauses in connection to project anchors.

But because lifestyle centers typically do not have anchors, in order to ensure top tenants sign onto projects, developers allow generous co-tenancy clauses. In many cases, these clauses are granted on lists of up to 10 retailers.

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