14A — September 14 - 27, 2012 — Mid Atlantic Real Estate Journal
C OMMERCIAL R EAL E STATE L AW Mi i Re l Est te J r l
www.marejournal.com
n the current economic climate, many tenants are finding that the rev- By Nicholas Racioppi, Jr. & Joshua Greenfield, Riker Danzig Scherer Hyland & Perretti LLP The enforceability of go dark provisions: Tenants beware I the landlord. In office leases, this is often a black and white decision for a tenant, ing provision.
provision, i.e., a court order compelling the tenant to operate in the space in ac- cordance with the go dark provision. Most courts to which this issue has been brought have refused to grant specific performance. The basic rationale behind the courts’ decision is the same: enforcement of a go dark provision would necessarily entail detailed supervision by the court over a long period of time. Instead, courts have traditionally held that viola- tion of a go dark clause was just like any other breach of a lease covenant, entitling the landlord to monetary damages. Tenants should be aware that damages can be severe if the tenant’s vacating allows another tenant to pay reduced rent or vacate under a co-tenancy clause. While most courts have not granted specific performance of go dark clauses, specific performance has been grant- ed in at least one instance by a New Jersey court. In that instance, the landlord was seeking only that the tenant be forced to open for the minimum hours set forth in its lease. The landlord was willing to rely on the tenant’s reluctance to suffer damage to its reputation to ensure that the store would be adequately stocked and staffed. In that instance, the court found that the sought performance standards were completely objective and or- dered the tenant to remain open. In summary, when a ten- ant with a go dark provi- sion is considering ceasing operations, both a landlord and a tenant must examine their potential rights and remedies, not only in terms of the lease, but in terms of the practicability of enforce- ment of the provision and the effects the breach would have on the entire retail center. Nicholas Racioppi, Jr., Esq. is the head of Riker Danzig’s Real Estate Group, and JoshuaGreenfield, Esq., is an associate in Riker Dan- zig’s Real Estate Group. ■ The contents of this article are for information purposes only. Nothing contained in this article is intended to be relied upon for legal advice.
in the center is not occupied (simply being leased is not enough, it must be actively used for retail purposes). Go dark provisions help a land- lord to project a vibrant air around a retail center or mall and also give some certainty as to how much space they will have occupied. When a tenant with a go dark provision attempts to vacate the store, in addi- tion to any claim a landlord might have for unpaid rent, landlords may seek specific performance of the go dark
Go dark provisions man- date that a tenant must oc- cupy and use the space and often have minimum oper- ating requirements (hours, employees, etc.). The reason for these provisions is simple: empty spaces can make other prospective tenants question the vitality of a retail center. Additionally, many tenants in a retail center have co-tenan- cy provisions that allow them to pay a reduced rent or ter- minate a lease early if a given percentage of square footage
enue gener- ated by some locations fail to justify the variable ex- penses in- curred f or that location a n d t h a t they would be better off
as the land- l o r d d o e s not usually care if the tenant is in the space, so long as the landlord is c o l l e c t i ng rent. For re- tail tenants,
Nicholas Racioppi, Jr.
Joshua Greenfield
closing the store and continu- ing to pay the rent while they attempt to sublet the location or work out a settlement with
particularly those in centers or malls, they must first check if their lease has a “go dark” or continuous operat-
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