Use Disclaimer to Carve Out Right to Break Continuous Operation
Most retail tenants don’t want to be forced to open or continuously operate at their space. That’s because if their business suffers financially, it may be better to not open or go dark rather than lose money. What if your lease doesn’t say that you’re required to open or operate continuously? Just because the lease doesn’t mention this, that doesn’t mean you’re off the hook. Even a lease that’s silent on that issue might not protect you if you choose not to open or to go dark. That’s because, depending on your local laws, there might be an implied covenant—that is, a promise—in your lease requiring you to open and/or continuously operate at your space. And if you don’t, it would be considered a lease violation.
Adding a disclaimer to your lease (unless you’ve agreed in the lease to open or to continuously operate) helps. Say in the disclaimer that there’s neither an express nor an implied covenant in the lease to open or to operate continuously. And make sure that the owner acknowledges the disclaimer. This way, it’s clear to a court that you and the owner have specifically agreed that you don’t have to open or to operate continuously.
To get this disclaimer, ask your attorney about adding the following language to your lease:
Model Lease Language
Nothing set forth in this Lease shall be construed, in any manner whatsoever, as an express or implied covenant on the past of Tenant to commence business operations or to thereafter continuously operate any business operations on the Premises, and Landlord specifically acknowledges that there is no covenant of initial or continuous operation on the part of Tenant, express or implied.
There are no guarantees, however. The disclaimer might not work if the owner sues you for not opening or for going dark, because a court can make its ruling based on other factors, too. For example, if you were required to pay rent based only on gross sales, and your operations are vital to the success of the center, you might lose the case. But if you include the disclaimer in the lease, there’s a better chance that a court will rule in your favor if an owner sues you for not opening or for going dark.
It’s important that, before you sign your lease, you check it for any provision that might be interpreted as a clause that will require you to open or to continuously operate. Even if you add the operating covenant disclaimer to a lease, that other provision could undermine its effectiveness.