Co‑Tenancy Clauses: When Tenants Can Pay Less if Anchors Leave

In many shopping centers, your sales depend on traffic created by other tenants—especially anchor stores and high-performing neighbors.

A co‑tenancy clause is a retail lease provision that can protect tenants when that traffic disappears. Done well, it can reduce rent or allow termination if key stores close. Done poorly, it can look protective but be nearly impossible to trigger.

This guide explains co‑tenancy basics, common traps, and tenant-friendly terms to request. (Not legal advice.)

What “co‑tenancy” means in a retail lease

Co‑tenancy provisions usually fall into two categories:

1) Opening co‑tenancy

Your obligation to open (or to pay full rent) is conditioned on certain tenants being open.

Example: “Tenant’s obligation to open is conditioned on Anchor A and Anchor B being open and operating.”

2) Ongoing co‑tenancy

After you open, your rent (or other obligations) is conditioned on a minimum tenant mix/occupancy level.

Example: “If occupancy drops below 70% of gross leasable area, tenant pays alternate rent.”

Why co‑tenancy is a high-value clause

If you signed a long-term lease based on:

an anchor tenant drawing traffic
a curated tenant mix
an implied “destination” shopping experience

…and that changes, your economics can break. Co‑tenancy helps align rent with the center’s performance.

It can also interact with “continuous operation” clauses: you don’t want to be forced to stay open at a loss if the center is effectively empty.

Common co‑tenancy traps (what tenants should watch for)

1) “Replacement anchor” definitions that are too loose

Landlords may define “replacement” so broadly that any tenant counts, even if traffic impact is far lower.

Tenant-friendly anchors are usually defined by:

minimum square footage
category/brand type
comparable traffic draw

2) Short “cure” windows that don’t match reality

If the landlord gets 12 months to replace an anchor but you get no rent relief during that period, the clause doesn’t protect you.

3) Trigger thresholds that are nearly impossible

Examples:

occupancy measured in a way that excludes dark stores
anchor counted as “open” even when operating limited hours
landlord allowed to count non-retail uses as “occupied”

4) Remedies that are toothless

Some leases say the remedy is only:

“tenant may go dark” (close) but still pay full rent

That might not help if the center no longer works for your business.

Tenant-friendly remedies (what to ask for)

Remedies are the heart of co‑tenancy. Practical structures include:

1) Alternate rent (temporary relief)

Common forms:

reduced base rent (a fixed reduction)
percentage rent only (if percentage rent is already part of your deal)

The goal is to align rent with reduced traffic.

2) Termination right after an extended failure

If co‑tenancy failure lasts longer than X days/months, the tenant can terminate.

This is often the most meaningful protection for small tenants.

3) Relief from continuous operation

If you’re allowed to reduce hours or temporarily close during co‑tenancy failure, define it clearly so you aren’t in default.

How to negotiate co‑tenancy without losing the deal

Landlords sometimes resist co‑tenancy because it transfers center risk to them. A reasonable approach is:

ask for co‑tenancy only if your use depends heavily on traffic (restaurants, specialty retail, services)
use objective anchor definitions
propose a staged remedy (alternate rent first, termination later)

Also consider related clauses:

exclusive use (traffic from “your” category matters) — see /blog/exclusive-use-radius
force majeure and closures — see /blog/force-majeure-commercial-lease

How BizLeaseCheck helps

BizLeaseCheck flags co‑tenancy provisions and common loopholes such as:

broad replacement anchor language
weak remedies that don’t reduce tenant cost
conflicts with continuous operation clauses

Upload a lease for a fast first-pass review:

/analyze

Not legal advice

This article is for informational purposes only and is not legal advice. Co‑tenancy provisions are highly negotiated and vary by shopping center type, market, and tenant category. Use this guide as a checklist and consult qualified professionals for your situation.