Recapture Clause

A recapture clause is the landlord’s counter-move to a tenant’s request to sublease or assign. Instead of approving the transfer, the clause lets the landlord terminate the lease for that space and take it back — often so the landlord can re-lease it at current market rates rather than let the tenant profit from a sublease. For a healthcare practice, a recapture clause can quietly undermine the value of its exit rights: a hard-won assignment provision means little if the landlord can simply recapture the space the moment you try to use it. This matters most when a practice is being sold, since the buyer typically needs to take over the lease. Tenants should push to limit recapture — for example, allowing it only for a full assignment, not a partial sublease, or giving the tenant a chance to withdraw its request if the landlord elects to recapture.

A recapture clause can nullify the sublease and assignment rights a tenant negotiated, especially during a practice sale. Limiting its scope preserves the flexibility those exit rights were meant to provide.

A physician selling her practice requests to assign the lease to the buyer. The landlord invokes its recapture clause, terminates the lease, and offers the buyer a new lease at a higher market rate — complicating the sale the assignment right was meant to protect.