In the video, Jack explains the concept of a co-tenancy clause in a lease, particularly in retail leasing. The clause allows one tenant to terminate or modify their lease if another tenant leaves or shuts down. He highlights the importance of understanding the nuances and definitions of co-tenancy clauses, especially in the current retail sector:
Hi, this is Jack Miller at Gelt Financial. I’m making this today and hoping to give you an explanation on a term that a lot of people don’t know about in retail leasing. It’s usually in retail, but sometimes in other leasing too. It’s called a co-tenancy clause. And what a co- tenancy clause, at its purest form means, if you have, let’s say, two stores in a retail shopping center, and Store A is there first, and your Store B, Store B may have a clause in their lease that says if Tenant A leaves the shopping center or shuts down, Tenant B can get out of their lease and vacate or something else. Sometimes it’s vacate, sometimes it’s reduced rent. But effectively, it gives one tenant the right to terminate a lease or change the economics of the lease if something happens to another tenant. So, landlords, watch out for co-tenancy clauses, and lenders, watch out for co-tenancy clauses.
In today’s world, where major stores are closing down all the time in the retail sector, co- tenancy clauses are critical. And not every co-tenancy clause is the same. There’s a lot of differences, and it’s a lot of nuances, and there’s a lot of definitions. So watch the definitions because the devil is always in the detail. And as a sidebar, I’ve seen very sophisticated landlords and lenders lend money or buy property based on leases without really reading the lease. They’ll look at the dollar amount and the termination date, but they don’t look at all the co-tenancy clauses and all of the other clauses that can be in retail or other leases. So be detailed, check out the details, and that’s it.
Have a great day! I love real estate. I’m going to keep making these. I’ve been getting good feedback. I hope you like this. If you want to know what co-tenancy, if you’re a weirdo like me and get turned on by co-tenancy clauses and some of the terminologies and leases, now enjoys reading leases, we’re in the same group. Anyway, like the YouTube. Like the YouTube channel and you’ll be notified when more pop up. Take care and have a great day.