Recapture clause

How it is triggered

Most commonly, the tenant delivers a request for consent to assign or sublet, and the landlord has a window, often 15 to 30 days, to elect recapture instead. Some leases also trigger recapture on the tenant going dark, on a change of control, or on a request to reduce the premises.

Why it matters more than it appears

A recapture right effectively converts the tenant's ability to sublet into an option held by the landlord. A tenant that finds a subtenant at above market rent will not get to keep that space or that spread, because the landlord will recapture and lease directly. In a falling market the landlord declines to recapture and the tenant remains on the hook. The right, in other words, is exercised only when it favors the landlord, which is exactly what makes it valuable.

Tenant protections worth negotiating

• A right to withdraw the request. If the landlord elects recapture, the tenant should be able to rescind its consent request within a few days and keep the space. Without this, exploring a sublease becomes dangerous.
• Partial recapture limits. Recapture of part of a floor can leave the tenant with an unusable remainder and no reduction in load factor. Require that partial recapture leave a commercially reasonable configuration with separate access and restrooms.
• Carve outs for permitted transfers. Assignments to affiliates, successors by merger, and entities acquiring substantially all the tenant's assets should not trigger recapture at all.
• A proportionate rent reduction and an equitable adjustment of pro rata share on partial recapture, stated explicitly.

Where it hides in a redline

Recapture usually lives inside the assignment and subletting article rather than in its own section, so a change to it reads as a change to the transfer provisions. The withdrawal right is a single sentence and it is the sentence most often deleted.