Don’t Rely on Tenant’s Implied Consent to Continually Operate

Don’t rely on “implied” covenants that aren’t expressly stated in the lease if you want retail tenants to continuously operate from their space. There’s a possibility that a court will find that such a covenant exists in limited circumstances, such as when the lease requires a long-term tenant to pay a minimal base rent but substantial percentage rent while limiting the tenant’s use and ability to assign and sublet and barring competition. However, most courts don’t recognize an implied covenant to continuously operate.

Accordingly, if you want assurances of continuous operation, include an express covenant to this effect in your lease. Specifically, spell out that the tenant must continuously, actively, and diligently use and occupy the entire space for the permitted use during set hours throughout the entire lease term, including any renewals. This way, you can be sure that the tenant will be barred from going dark or operating only sporadically from the space without having to cross your fingers and hope that a court will defy the odds and read such a covenant as being an implied term of the lease.