Co-Tenancy Clause

A co-tenancy clause protects a tenant whose business depends on the traffic drawn by other tenants — most often an anchor tenant or a minimum level of overall occupancy. If the anchor closes or occupancy falls below an agreed threshold, the clause lets the tenant reduce rent (often to a percentage-of-sales figure) or, after a cure period, terminate the lease. The logic: a practice that signed a lease partly because of a busy grocery anchor or a full, active center should not be locked into full rent when that traffic disappears. While co-tenancy is most common in retail, it is relevant to healthcare-adjacent uses that rely on foot traffic — a med spa, optical shop, or urgent care in a retail center. The clause must define precisely which tenants or occupancy level trigger it, the remedy, and the timeline, since landlords resist broad co-tenancy protection.

For practices that depend on a center’s traffic, a co-tenancy clause prevents paying full rent after an anchor leaves. Defining the trigger and remedy precisely is what makes the protection real.

An optical retailer leases in a center anchored by a national pharmacy, with a co-tenancy clause. When the pharmacy closes, the clause lets the retailer drop to reduced rent until a comparable anchor is replaced — protecting it from paying full rent in a center that lost its draw.