Control Owner’s Right to Recapture Your Space

Control Owner’s Right to Recapture Your Space



Getting the right to “go dark”—that is, stop operating while continuing to pay rent—if your business isn’t generating enough revenue, is very valuable. That’s because going dark can save you the cost of stocking and staffing the space you rent, among other expenditures. As in most cases where a tenant gets a valuable right, the owner of the space will want something in return for giving you a go dark right: a recapture right that allows it to take back the space and replace you with another tenant.

In a typical situation, the owner’s recapture right would be triggered if you notify it with a “go dark notice,” that you intend to go dark, or if you cease operations in the space for a set period of time—the “go dark period”—without sending the owner any notice. The owner can choose to exercise its recapture right when it gets your go dark notice or when the go dark period ends, but first it must send you a “recapture notice” saying that it intends to recapture your space. The lease will end on the “recapture date”—a set number of days after you get the recapture notice.

But the owner’s recapture right can be triggered even if you’re closing only temporarily, not going dark. Depending on how the go dark period is measured, the owner could end up recapturing the space for even a temporary closure. That’s why it’s crucial to negotiate limits to the go dark period and recapture date.

One limit that you can set is that operations must cease for a long period before the owner can exercise its right. It’s important to make your go dark period so long that it clearly isn’t meant to be temporary. You can do this by saying in the lease that you must have ceased operations at the space for at least 365 days. And say that the 365 days must be consecutive, because otherwise, the owner could add up nonconsecutive days in an attempt to trigger its recapture right. To reserve your right to a substantial go dark period, ask your attorney about adding the following language to your lease where it discusses the recapture date:

Model Lease Language

Tenant shall not be deemed to have ceased operations in the Premises under the Recapture Right unless there are no operations in the Premises for at least [insert #, e.g., 365] consecutive days (“Go Dark Period”).

For more limits and conditions that can protect you when negotiating a recapture right, and model language that you can adapt, see “Negotiate Four Limits and Conditions in Owner's Recapture Clause,” available to subscribers here.

 

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