Continuous Operation Clause

A clause commonly written in retail leases that requires a tenant to continuously operate at a property for the entire term of the lease. As anchor tenants may act as a demand driver for a retail center, landlords may enforce this clause to minimize the risk of a major tenant “going-dark.” In situations that a continuous operation clause is not included in the lease terms, a non-profitable tenant may leave the premises, and the center may suffer as a whole. Smaller tenants may negotiate rent abatements to make up for the loss in traffic due to the anchor tenant ceasing operation.

For example, assume a major grocery store has begun to operate at a loss in a shopping center, and has requested to “go-dark.” Knowing that the grocery store may drive a substantial amount of people to the area, the landlord may have negotiated a continuous operation clause that requires that the tenant maintain full operations. Although the grocery store may not be profitable, staying open continues to drive traffic and traffic helps to maintain the value of the overall retail center.

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