Go Dark ProvisionRealized1031.com2021-02-04 08:00:00
Go Dark Provision
A go dark provision is clause often used in retail leases which governs whether or not a tenant may vacate a space, while continuing to pay rent, prior to lease maturity. Opposite of a continuous operating covenant, go dark provisions allow a tenant to cease business operations when they turn unprofitable. Landlords often dislike this type of provision, as they can lead to rolling vacancies and gradually shrinking traffic in a retail center.
A go dark provision is also called just go dark or a go dark clause. It is more beneficial to the tenant than the landlord. The provision is negotiated with each lease and not all leases will include it. In some cases, the tenant may be able to negotiate not paying rent if they go dark.
Landlords may try to salvage the situation by using a closely related clause called go dim. Rather than shutting down the business, the tenant adjusts their operations, which may include some form of scaling back and reducing operational hours. From the landlord’s perspective, it can generally be better to keep the space filled with a semi-operating business rather than create a vacancy. A vacancy can negatively affect nearby businesses.
A landlord may include a landlord’s recapture right in the lease for added protection. This right allows the landlord to terminate the lease without either party going into default. Terminating the lease frees the landlord up to seek a new tenant. The landlord has the flexibility to terminate the lease only once a new tenant has been secured.
Once a tenant decides to go dark, they most likely will still have to pay rent. However, shutting down the business even while continuing to pay rent probably will result in significant savings.
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