What happens to a co-tenancy clause tied to other tenants in the plaza when the business is sold?
A co-tenancy clause — which typically gives a tenant reduced rent or an exit right if a specified anchor tenant, or a minimum level of occupancy in the plaza, isn't maintained — is a term of your lease, and it generally continues to apply after an assignment the same way any other lease term does, since the buyer is stepping into the same lease you had. The clause itself doesn't change just because the tenant operating the business does.
What can get complicated is whether the buyer is even aware the clause exists, and whether they understand the current co-tenancy situation in the plaza at the time of the sale — a co-tenancy right that's currently being triggered (because an anchor tenant left, for example) can be valuable to a buyer, and one that's about to lapse or has specific notice requirements can be easy to lose if nobody flags it during the transition.
Because co-tenancy provisions are easy to overlook in a lease review focused mainly on assignment and rent, make sure this clause is specifically identified and explained to your buyer. A Treadstone business lawyer can review it and confirm its current status before closing.
Key takeaways
- A co-tenancy clause is a lease term that generally continues to bind an assignee unchanged.
- The clause doesn't reset or disappear just because the tenant operating the business changes.
- Buyers need to understand the plaza's current co-tenancy status, not just the clause's existence.
- Co-tenancy rights are easy to overlook — flag them specifically during the lease review.