Tenant Protections
Kick-out clause
Also called: termination option, sales kick-out
A kick-out clause gives a retail tenant the right to terminate its lease early if sales fail to reach a stated threshold by a measurement date, usually after the third or fourth year. Landlords typically condition the right on recapture of unamortized deal costs such as the improvement allowance and leasing commissions.
A kick-out is a tenant's escape from a location that did not work, priced so that the landlord is not funding a free option.
The standard structure
- A measurement date, commonly at the end of lease year three or four
- A sales threshold, stated as gross sales for the preceding 12 months
- A notice window, often 60 to 90 days after the measurement date, outside of which the right lapses
- A termination fee, usually the unamortized portion of the tenant improvement allowance, free rent, and leasing commissions
- An effective date some months after notice, so the landlord can re-lease
The details that make it usable or useless
The clause fails a tenant in predictable ways. The notice window is the first: a right exercisable only within 30 days of a measurement date that itself depends on a sales statement the tenant has not yet compiled is a right that expires unnoticed. Push for a longer window, running from delivery of the sales statement.
The second is the fee. Where the fee includes unamortized allowance plus commissions plus the full remaining free rent, the cost of leaving can exceed the cost of staying, which makes the clause decorative. Ask for straight line amortization over the initial term at a stated rate, and confirm what is included in writing rather than by reference to landlord's costs.
The third is the threshold itself. A threshold set at a number the tenant's own pro forma treats as a success case does nothing.
Landlord side considerations
From the landlord's position, a kick-out is a real underwriting problem, because a lender values the lease term. Reasonable landlord protections: a single measurement date rather than a rolling right, a requirement that the tenant have operated continuously and in good standing to exercise, exclusion of periods affected by remodeling or casualty from the sales calculation, and a fee that genuinely returns unamortized capital.
In the redline
Kick-out language usually survives round one intact and gets narrowed in round two, when a landlord's counsel adds the continuous operation condition and shortens the notice window. Both changes are short. Both matter.
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 co-tenancy clause lets a retail tenant reduce rent or terminate its lease if named anchor tenants close or if overall occupancy at the center falls below a stated threshold.
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 go dark clause governs whether a retail tenant may close its store while continuing to pay rent through the end of the term.
A tenant improvement allowance is a sum the landlord contributes toward building out a leased space, usually quoted in dollars per rentable square foot and paid on completion against submitted invoices.
This page is general information, not legal advice. Review lease language with qualified counsel.