Glossary

Kick-Out Clause

Also known as: sales kick-out, early termination right (sales-based)

A lease provision giving a retail tenant a one-time right to terminate the lease early if its gross sales fail to reach a specified threshold by a specified test date.

Unlike a co-tenancy clause, which is triggered by the landlord's or other tenants' performance, a kick-out clause is triggered by the exercising tenant's own underperformance, typically measured after an initial trial period (e.g., sales in year two below a stated figure). Exercise usually requires written notice within a defined window and may obligate the tenant to pay a termination fee or forfeit the unamortized balance of its TI allowance and leasing commission. Landlords underwrite kick-out risk explicitly when sizing tenant improvement investment and amortization payback periods, since a kick-out exercised early in the term can leave significant unrecovered leasing capital.