"Going Dark" Rights on a Commercial Lease

If you are a small retailer in a mall, your solvency is most likely dependent on a flagship store such as a Target or a Walmartthat brings foot traffic to the commercial property. If the flagship store closes, other surrounding retailers at the mall may suffer in sales. Whenever a retailer negotiates the terms of a commercial lease, these terms should always include a "going dark" clause. This provision allows the retailer to eithershut down operations("go dark") and/orreceive a substantial rent reduction in the case where a majortenant in the mall closes.

"Going Dark"

In today's economic climate, many retailers are finding it more difficult to continue operations. In large shopping malls, shoppers may encounter numerous empty stores asmore and more stores go bankrupt or cease business for a number of reasons. Those empty stores don't necessarily mean that the property isn't leased. The lessee may have simplyceased tooperate, or, in industry terms, have "gone dark."

Most commercial lease provisions now contain tenant-driven terms that allow tenants to cease operations in a leased space if continuing tooperate is no longer economically feasible. The "go dark" provision is basically a co-tenancy clause. Although some landlords still resist these clauses, more landlords have become amenable given the economic realities of multiple retail closures. In some contracts, a lessee may go dark but continue to pay a portion of rent to the landlord. However, the rent will be substantially decreased.

Benefits for Lessee

Cutting Losses - When a location is no longer profitable, a tenant will decide that paying rent without the additional costs of carrying inventory and paying salaries minimizes the losses.

Temporary Closing - In some cases, a retailer may need to "go dark" for major operation restructures or a brand overhaul. Without a "going dark" clause, the retailer would be in default for closing his doors. However, the clause gives him leeway to preserve the time and save the costs of not having to operate during the restructure or rebranding.

Exclusivity Clause - A retailer may have an attractive spot in the mall but is still not profiting. He or she might negotiate with the landlord to move to another area, but allow the first store to "go dark." This provision would be more of an exclusivity clause that prevents any competitors from utilizing the closed store.

Consult an Attorney

Negotiating a commercial lease can become very complicated and you want to ensure that the contract is to your benefit. Speak with a real estate attorney experienced with commercial leases to avoid any complications that might arise with contract negotiations.

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