Limit Tenant's Hours Cotenancy Clause Remedies

An hours cotenancy clause—which says that a tenant will be required to open during the center’s normal hours of operation only if a certain percentage of other tenants are also open—is a typical provision in retail leases. But like many other lease issues that seem ordinary at first, it should still be carefully negotiated. That’s because in some clauses, nothing prevents the tenant from turning it into a right-to-go-dark clause. Here’s how you can make sure that doesn’t happen.

Resist Right to Go Dark

Owners often strongly resist giving a tenant a right to go dark even in an operating cotenancy clause. Instead, they give a tenant such remedies as a right to pay a percentage of gross sales instead of minimum rent and percentage rent, if one or more other tenants close or go dark during the lease term and aren’t replaced within a set time period. But based on the way some hours cotenancy clauses are drafted, if a certain percentage of the tenants in the center are, say, closing an hour early, the tenant could argue that the hours cotenancy clause gives it not just the right to shut down for an hour, but also the right to go dark for the rest of the lease. This could happen even though you never intended this result or had refused to grant the tenant a right to go dark in the operating cotenancy clause.

Make Cutback Match Co-Tenants

To avoid that outcome, say in the lease that if the hours cotenancy clause is violated, the tenant should have only one remedy: to stop operating only during those hours (or partial hours) when the hours cotenancy requirement isn’t being met. For example, suppose the center’s normal hours of operation each day are from 9 a.m. through 9 p.m. But less than the required percentage of the other tenants are open on Saturdays and Sundays from 7:30 p.m. through 9 p.m. The tenant’s sole remedy would be to not open on Saturdays and Sundays from 7:30 p.m. through 9 p.m.

Ask your attorney about using this language in your lease’s hours cotenancy clause, and make sure to define “Normal Shopping Center Hours” and “Hours Cotenancy Requirement” elsewhere in the lease:

Model Lease Language

Notwithstanding anything to the contrary contained herein, if Tenant is open for business during Normal Shopping Center Hours and the Hours Cotenancy Requirement is not met with respect to any of such Normal Shopping Center Hours, Tenant’s sole remedy shall be that Tenant shall not be required to operate during the hour(s) or partial hour(s) that the Hours Cotenancy Requirement is not met (so that, for example, if Normal Shopping Center Hours are 9:00 a.m. through 9:00 p.m., and the Hours Cotenancy Requirement is met during all of the Normal Shopping Center Hours, except Saturdays and Sundays from 7:30 p.m. through 9:00 p.m., then Tenant shall not be required to operate on Saturdays and Sundays from 7:30 p.m. through 9:00 p.m.).

Remember to base the hours cotenancy clause on a percentage of the tenants actually operating at the center (as opposed to a percentage of the gross leasable area). This way, if you have excessive vacancies at your center, they won’t affect the hours tenants are operating.