Why Landlords Should Consider Continuous Operations Clauses | Featured on PropertyShark

With the holiday season in full effect, the retail business in New York City is booming. In fact, holiday sales are expected to rise by as much as 4%. As such, landlords can expect their retail tenants to bring in more customers than ever.

 

But, what happens if a tenant decides to shut down its operations in the middle of the busiest season of the year? As a landlord, avoid this kind of scenario by including special clauses in your leases.


Continuous Operations Clause

A handy clause for landlords of retail tenants in shopping centers is the continuous operations clause. This can often be implied, but it’s in your best interest to get it in writing. This clause ensures that the tenant is legally obligated to carry out its operations throughout the duration of the agreed-upon term.

Essentially, this type of clause is a form of protection for landlords. For example, it protects your income by ensuring you won’t lose rent. It also protects the image of the overall shopping center; when customers see vacant spaces, they tend to shy away from the shopping center altogether. Further effects of vacancies in shopping centers may include decreased foot traffic, reduced sales and discomfort among other tenants.

A continuous operations clause typically states the exact premises that must remain open during the business hours specified in the lease. In some cases, it might even state the number of days a store must be open each week. Additionally, the clause may also cite the landlord’s rights of re-entry upon the tenant’s non-compliance.


Go-Dark Clause

In some cases, tenants may not be at fault for terminating their operations during the lease term. A special clause that allows them to do so is known as a “go-dark” clause.

“Going dark” means that the tenant may vacate their space, but that they are still liable for rent during the agreed-upon term. Basically, this is an escape plan for tenants who may believe the leased premises is unprofitable and no longer suits their business.

With these precautionary clauses in place, landlords are guaranteed to minimize their exposure to risk and keep their shopping centers merry and bright.


https://www.propertyshark.com/Real-Estate-Reports/2019/12/18/why-landlords-should-consider-continuous-operations-clauses/

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