Glossary

Co-Tenancy Clause

Also known as: Co-Tenancy Provision

A retail lease provision allowing a tenant to pay reduced rent, or in some cases terminate its lease, if a specified anchor tenant or a minimum occupancy threshold at the shopping center is not maintained.

Co-tenancy clauses protect in-line and junior anchor tenants whose sales depend on customer traffic generated by a named anchor (an opening co-tenancy condition) or by overall center occupancy remaining above a stated percentage (an operating co-tenancy condition). When a co-tenancy failure is triggered, the affected tenant's remedy is typically to pay alternate (reduced) rent, and if the failure persists beyond a cure period, to terminate the lease outright. These clauses create a significant and often underappreciated credit risk for lenders underwriting retail properties, since the loss of a single anchor can cascade into rent reductions or vacancies across multiple in-line leases simultaneously — a risk that rent rolls alone do not reveal without a co-tenancy abstract of each lease.