Landlord Protections
Continuous operation clause
Also called: operating covenant, continuous occupancy clause
A continuous operation clause requires a tenant to remain open for business during stated hours throughout the term, rather than merely paying rent. It is standard in retail leases where the landlord collects percentage rent or where the tenant's presence supports the rest of the center.
The clause converts a payment obligation into an operating obligation. That is a materially larger commitment and it should be priced as one.
What a typical clause requires
- Continuous operation of the permitted use in the entire premises
- Operation under the named trade name
- Minimum hours, often mirroring the center's hours or an anchor's hours
- Adequate staffing, fixtures, and inventory
- No use of the premises for storage or as an outlet operation
The remedies attached to it
Breach remedies vary widely and are worth reading closely. Common ones include liquidated damages per day dark, acceleration of the landlord's right to terminate, loss of renewal options, and a recapture right. A liquidated damages figure stated per day can compound quickly and should be tested against a realistic closure scenario.
Tenant positions that are usually achievable
- Exceptions for casualty, condemnation, force majeure, remodeling, and inventory. A remodeling window of 30 to 60 days once every few years is standard and reasonable.
- A cap on the operating covenant's duration, so it applies for the first three to five years rather than the full term.
- Deletion of the trade name requirement, or permission to operate under any name used by the tenant's affiliates generally.
- Hours tied to the tenant's own chain standard rather than the center's, where the tenant's format genuinely differs.
- A conversion right, where the tenant may cease operating in exchange for the landlord's right to recapture the space.
The interaction that catches people
A continuous operation covenant and a negotiated go dark right are in direct tension. If both appear in a draft, one of them is drafted as an exception to the other, and which one governs depends on wording that is easy to skim. Where a landlord redline adds a continuous operation covenant to a lease that already contained a go dark right, that is not a cleanup edit.
Catch this clause when it changes
CRE Redline pulls every tracked change out of each redline round, ranks it by how much it moves, and keeps contested clauses visible from round to round. Round 1 of every deal is free.
Analyze your first round freeRelated terms
A go dark clause governs whether a retail tenant may close its store while continuing to pay rent through the end of the term.
Percentage rent is additional rent a retail tenant pays based on gross sales above a stated breakpoint, letting the landlord participate in the location's performance.
A recapture clause lets a landlord take back leased space and terminate the lease as to that space when a tenant requests consent to assign or sublet, or when the tenant goes dark.
An exclusive use clause bars a landlord from leasing other space in the same property to a tenant whose primary business competes with the protected tenant's stated use.
This page is general information, not legal advice. Review lease language with qualified counsel.