What is a co-tenancy clause and why does it matter for a retail tenant in Ontario?

A co-tenancy clause ties a retail tenant's obligations, or rights, under the lease to whether certain other tenants, usually a major anchor store or a minimum number of other tenants, remain open and operating in the same plaza or shopping centre. If the anchor tenant closes, leaves, or isn't promptly replaced with a comparable business, a co-tenancy clause typically gives the smaller tenant some relief, such as a reduced rent, a right to pay a lower percentage of sales instead of fixed rent, or in some versions, a right to terminate the lease altogether.

This matters because many smaller retail tenants depend heavily on the foot traffic an anchor tenant generates, and losing that traffic while still paying full rent for the same space can quickly turn a viable location into an unprofitable one. A co-tenancy clause is really a way of sharing that risk with the landlord instead of leaving it entirely on the smaller tenant.

These clauses are heavily negotiated and vary enormously in what they actually trigger and what relief they provide, so a tenant relying on an anchor's presence for its own business model should push to have one included and reviewed carefully rather than assuming general lease language offers similar protection.