The profitability of many small retailers and service providers is not only dependent upon factors over which the business owners have some measure of control, it is most likely also strategically linked to the existence of a nearby “anchor” or flagship tenant that brings traffic – and dollars – to the commercial property. Each time a large tenant customer drives by, he or she gets at least a glimpse of the small retailer or service provider.
Many small businesses recognize that with size comes leverage. They often fail to understand that large tenants often use that leverage to gain some significant advantages in their leasehold terms – advantages that can work against the business interests of the smaller tenants. For example, while a small space lease will likely contain a provision requiring the owner to remain open for business during the term of the lease, many large lessees get the benefit of “go dark” clauses.
With a typical “go dark” clause, the large tenant can do just that – go dark and close its business – and not be in default, as long as it continues to pay its rent. While the landlord, of course, would prefer to have an active tenant, as long as its cash flow is protected, it can often afford to look the other way. Not so, however, for the small space tenant that needs the traffic from the anchor.
When negotiating a commercial lease for space that is dependent upon anchor tenant traffic, many experienced small space tenants hold out for “dark space” provisions of their own. Sometimes called “co-tenancy requirements,” these lease provisions provide for various alterations in the small tenant’s obligations should the anchor tenant vacate the premises. Typically, the rent may be reduced to some specified level – or even eliminated – during the period that the large space remains “dark.”
Care should be given to the wording of these small space dark space clauses, however. If poorly drafted, they can sometimes be defeated by the landlord’s showing that the large tenant hasn’t actually abandoned the anchor space. For example, a small security force may still be present. Security guards don’t generate traffic for the small tenant, of course. The dark space clause should provide protection for the small space tenant in any situation in which the large tenant is less than fully open and operating in a manner that is reasonable for tenants of that type.
Is your business contemplating a new commercial property lease of any type? Is your current commercial lease up for renewal? Is your business dependent – at least in part – on a nearby anchor tenant or other business? If so, consider retaining a solid, strong, legal partner to help you with the intricacies and headaches involved. Running a business is stressful enough; let the experienced attorneys at Romano & Sumner handle your business law matters.
At Romano & Sumner, we pride ourselves not only on our professionalism, but also upon our client service. We know that each situation is unique. We return phone calls within one business day. We keep our clients well informed as to the status of their case. We complete the work within the allotted time frame. Call us at 281-242-0995 or complete our online contact form.
Romano & Sumner – Sugar Land, TX Attorneys