John Lewis Published in Commercial Leasing Law & Strategy
“Where’s the Door? Operating Covenants, Exclusives and Tenant Exit Strategies”

John Lewis’ two-part article, “Where’s the Door? Operating Covenants, Exclusives and Tenant Exit Strategies,” was published in the September 2009 and October 2009 issues of Commercial Leasing Law & Strategy. John’s article discusses the various types of operating covenants, exclusives and tenant exit strategies and explains remedies for violations of covenants.

In part one of his article, John explores some ways in which operating covenants and exclusive use provisions, in particular, affect the ability of a tenant to exit from a lease relationship. He notes, “the primary intent of this discussion is to alert the leasing practitioner to various issues and pitfalls which may be encountered.” In part two, John explains the remedies for violating these covenants.

In his article, John explains why a retail tenant negotiating a new lease should always consider its alternatives for exiting from the lease relationship in the event that circumstances change in the future. John notes that “a retailer must take into account the uncertainty of the future, recognizing that a highly successful store of today may turn into an economic black hole in the future.” John also discusses how in difficult economic times, retailers often seek to restructure and recover by assigning leases to other retailers. He recommends that “a careful practitioner on either side of a leasing transaction should think twice before including a covenant requiring a tenant to continuously operate within the entire premises during normal business hours throughout the term of this Lease….”

John’s article addresses several provisions and he provides a few scenarios to consider before negotiating a lease. He notes, “both landlord and tenant are better served if they acknowledge, at the outset of the landlord/tenant relationship, that despite their mutual intentions for a long-term relationship, neither party can predict the future….”