Encyclopedia
Co-tenancy
A retail lease clause that lets a tenant reduce rent or leave if key tenants close.
For example: Hypothetical: a shop's lease lets it pay reduced rent if the anchor leaves. (Illustration only, not a real deal.)
This is a general industry term with no single official definition. Your lease or contract wording controls.
Example only, not a real client. Say you open a specialty food store in a retail centre because a large grocery store anchors it. Your lease lets you pay reduced rent if the grocery store closes and is not replaced within a set time. When the anchor leaves, your rent drops while traffic recovers.
What I’d tell a friend
If your business depends on other tenants drawing customers, ask for co-tenancy protection in your lease.
Why it matters to you
It can protect a small retailer if the anchor leaves or the centre empties out. Without it, you keep paying full rent while the traffic you were promised disappears.
How to use it in your deal
Tenants should define the trigger clearly: name the anchor or set a minimum percentage of the centre open and operating, and say what counts as a replacement tenant. Spell out the remedy (rent reduced to a percentage of sales, or a lower fixed rent), how long it lasts, and when you can terminate. Ask that the remedy apply while the anchor's space is empty or used for a non-retail purpose.
Landlords should limit triggers to truly important anchors, give themselves time to re-lease and require the tenant to keep operating while getting the reduction. Buyers should model what happens to income if a co-tenancy clause is triggered, since one anchor closing can reduce rent from many tenants at once. Lenders look hard at this. Name the anchor tenants in the clause instead of relying on a general description.
Mistakes I see
Vague triggers. Remedies that don't last long enough. Landlords not tracking which leases have clauses. Buyers ignoring the domino effect.
In BC and Vancouver
The lease controls. BC courts interpret co-tenancy clauses based on their wording.
Official sources: CanLII (court decisions)
How it works
A co-tenancy clause ties some of your rights to other tenants being open, such as a named anchor or a set share of the centre. If that condition fails, you may get reduced rent or the right to end the lease.
These clauses are more common for retail tenants in larger centres.
Negotiating it
Define the condition clearly, the remedy, how long it lasts and what happens if the condition is not restored.
Landlords may resist strong remedies, so focus on the ones that matter most to your business. Check with a BC lawyer on the wording.
Questions to ask before you sign
- Which tenants or occupancy level trigger it?
- What's the remedy?
- How long does it last?
- When can I terminate?
- What counts as a replacement?
Opening versus operating co-tenancy
Co-tenancy clauses come in different strengths. Some protect you only at opening (named anchors must be open when you open). Others require them to keep operating, with rent relief or a termination right if they go dark.
The remedy has to be spelled out—reduced rent, kick-out, or something else—or you are left arguing. Anchors negotiate hard on these; inline tenants who skip them take silent risk.
Read the named-tenant list and the cure periods with your lawyer before you rely on co-tenancy in a pro forma.
Keep reading
Related terms: Anchor tenant, Percentage rent, Exclusive use
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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.