Importance of the Go-Dark Clause in Retail

Importance of the Go Dark Clause in Retail
When you sign a commercial lease for space for your retail business, you hate to think that you might end up having to vacate the building before your term has expired. Unfortunately, retail is an uncertain industry. You could find yourself in a financial situation where your only options are to shut your doors, making it important that you negotiate for a favorable Go Dark clause in your lease.

Go Dark Defined

The Go Dark provision allows you to stop operating in your space while continuing to pay rent, giving you the ability to cut down on expenses and reduce losses. Landlords may try to avoid adding a Go Dark clause to a lease or try to provide unfavorable terms, as closed business can detract from the appeal of their shopping centers or malls. Still, it is important that you negotiate to have one added in your lease.

What's Included in a Go Dark Clause

Here are some of the key parts of a Go Dark clause:

Opening Covenant. A Go Dark clause typically begins with language that says the business signing the lease must have their store open for at least one full business day in order for the clause to be enforced.

Notice to Go Dark. This part of the provision requires you to let your landlord know that you intend to go dark with a certain amount of notice. Try to negotiate for a shorter term such as 60 to 90 days, so that you can quickly take action if financial hardship occurs.

Tenant Not in Default. With this language, the clause stipulates that in order for you to exercise the Go Dark option, your rent must be fully paid up to that point.

Tenant Continuance. Next, the Go Dark provision will spell out that you must continue to pay rent and to perform other obligations required by the lease.

Recapture Rights. Most clauses will include language describing when and how the landlord can recapture the space and make it available to other tenants. This would mean that your company would no longer have to pay rent and that you would not be charged fees for early termination of your lease. Make sure that the landlord is required to give you enough time to move out of the space before recapturing. Language will also be included to stipulate what costs might be assessed to you if the landlord does choose to recapture. This may include fees or a portion of rent.

Tenant Right to Cure. The right to cure gives you the ability to reopen in your space after going dark. This language is very important as it can protect you from having your landlord recapture your space if your financial hardship is only temporary. Normally, you will need to exercise your right to cure within a certain number of months after you have gone dark.

Go Dark not Exercisable During Options. Your landlord will likely request that you add a provision that prevents you from going dark after you have exercised an option to extend your lease.