Set Deadline for Tenant to Report Cotenancy Violation

Your strong retail tenant may demand an “operating cotenancy” clause in its lease. This clause gives the tenant certain remedies (such as abated rent or the right to go dark) if one or more of your other tenants go dark during the lease and you don't replace them within a set time.

Because a tenant's exercise of a cotenancy remedy can hurt you badly, you'll want to limit the cotenancy clause as much as possible. One way to do this is to require the tenant to send you a notice when a cotenancy violation has occurred or lose the remedy forever, says Illinois attorney Jeffrey B. Gurian.

Set Time for Reporting Violation

Here's how the notice requirement works, says Gurian: To exercise its cotenancy remedy, the tenant must send you written notice that it intends to exercise the remedy within a set time—say, 30 days—after a cotenancy violation occurs. If the tenant doesn't notify you within that set time, it will forfeit its cotenancy remedy not just for that violation but for all future violations, he says.

To get this notice protection, add the following language to your lease's cotenancy clause, says Gurian (you'll need to define “Cotenancy Condition” elsewhere in the clause—that's the event that will trigger the cotenancy remedy): CLLI0044

Model Lease Language

• a. Tenant, as its sole and exclusive remedy under this Lease, shall have the right to [insert cotenancy remedy, e.g., abate its Minimum Rent by 50%], to be effective as of the day following the occurrence of the Cotenancy Condition; provided, however, that Tenant exercises such right by sending Landlord written notice of its intention to exercise its right to [insert cotenancy remedy, e.g., abate its Minimum Rent by 50%] no later than [insert #, e.g., 30] days from the occurrence of the Cotenancy Condition.

• b. If Tenant fails to timely exercise its right to [insert cotenancy remedy, e.g., abate its Minimum Rent by 50%] as set forth in Paragraph a hereof, Tenant shall forfeit such right forever.

Practical Pointer: Expect a savvy tenant to demand a less severe limitation; that is, that the loss of the remedy apply only to this one violation, says Gurian.

Further reading: CLLI, Jan. 2002, p. 1, “How to Limit Tenant's Operating Cotenancy Clause.”

CLLI Source

Jeffrey B. Gurian, Esq.: Partner, Becker & Gurian, 513 Central Ave., 5th Fl., Highland Park, IL 60035; (847) 433-2442.