CRE 101 · deweyluong.realtor

Go-Dark and Kick-Out Clauses Explained: How Retail Tenants Exit — and What Georgia Landlords Negotiate Back

A retail lease can let a tenant stop operating without stopping the rent — or leave entirely when sales fall short. The go-dark right lets a tenant close its doors, empty the store, and keep paying rent; the kick-out clause goes further and lets the tenant terminate when gross sales miss a stated threshold. Between those two exits sits everything a landlord negotiates back: a continuous-operation covenant, a recapture right that takes the space back after a dark period, and a payback of unamortized tenant-improvement money when the tenant walks early. In the made-up example on this page, an in-line tenant holds 3,200 SF at $28.00 a square foot — $89,600 a year in base rent. Its kick-out threshold is $450 a square foot in gross sales, or $1,440,000; it posts $1,150,000 instead, and the price of leaving is a $57,600 repayment. By Túy “Dewey” Luong, CCIM — Founding Broker, SERHANT. Atlanta · 318 closed sales / $281.2M career volume · 678-707-2498 · dewey.luong@serhant.com · https://deweyluong.realtor

The worked example uses made-up, rounded numbers throughout, including the store, the sales figures, and the improvement allowance; sales per square foot is rounded to the nearest cent. Real go-dark and kick-out language varies lease by lease and is enforced on its exact words. This page is general education only, not legal or tax advice — have your attorney review a live clause before signing.

Two exits that are not the same: going dark versus kicking out

• The go-dark right: the tenant may cease operating — doors locked, inventory out, sign dark — while the lease, the rent, and every other obligation continue in full. Going dark is not a default under a lease that grants the right; it is an option the tenant paid for at signing, usually because a chain wants the freedom to close an underperforming store without breaching its leases.
• The continuous-operation covenant: the exact opposite promise. The tenant covenants to operate continuously, for stated hours, fully stocked and staffed, for the whole term. A lease with this covenant and no go-dark right makes closing a breach — with whatever remedies the lease and Georgia law give the landlord.
• The kick-out clause: a sales-based termination right. If gross sales fall below a stated threshold in a stated measurement period, the tenant may terminate on notice. Unlike going dark, the kick-out ends the lease and the rent — which is why it is rarely granted without conditions, and why the landlord's payback and cure rights below are the real negotiation.
• Radius and assignment do not do this work: a radius restriction stops the tenant from opening nearby; assignment and subletting language moves the lease to someone else. Neither closes the store or ends the term.
• Why landlords resist both: a dark store pays rent but stops drawing traffic, and a terminated lease pays nothing at all. Both exits shift the center's momentum against the landlord and the neighboring tenants — so both are priced, conditioned, and time-limited rather than given away.

What a dark store does to the rest of the center

• Percentage rent goes to zero: percentage rent is a percentage of gross sales, and a closed store reports no sales. The landlord keeps the $89,600 of base rent in the worked example and loses every dollar of percentage rent the space would have produced — the mechanism a CAM reconciliation reports at year end, too late to fix.
• Co-tenancy starts counting: co-tenancy clauses are written on named tenants — or a stated share of the center — being open and operating, not merely in possession and paying. A dark anchor, or enough dark in-line stores, can open rent relief or termination rights for the tenants still open.
• Traffic is the real rent: in-line tenants leased their spaces for the foot traffic the anchors and the operating mix generate. A dark storefront breaks the shopping pattern, shortens visits, and cuts the sales of the stores on either side — which is why the injury from going dark exceeds the dark tenant's own sales, and why operating covenants exist.
• The rent still runs — and so does the term: going dark does not pause the lease. Base rent, taxes, insurance, and CAM continue, escalations still step, and the weighted average lease term a buyer underwrites still counts the dark tenant's years, even though the income quality behind them has changed.
• Lender and buyer optics: occupancy on a rent roll is leased occupancy; appraisers and buyers walk the center and count dark storefronts separately, because a center that is 95% leased and 80% open trades differently from one that is 95% open.

The worked example: a made-up 3,200 SF in-line tenant, one threshold, one payback

• The setup: a made-up Georgia in-line tenant leases 3,200 SF at $28.00 a square foot, so base rent is 3,200 times $28.00: $89,600 a year, plus its share of taxes, insurance, and CAM under its NNN lease. The landlord funded a $96,000 tenant-improvement allowance — $30.00 a square foot — amortized straight-line over five years, or $19,200 a year.
• The kick-out test: the lease lets the tenant terminate if gross sales fall below $450 a square foot in the measurement year. On 3,200 SF, that threshold is $450 times 3,200: $1,440,000. The store posts $1,150,000 instead — $1,150,000 divided by 3,200 SF is $359.38 a square foot, rounded to the nearest cent. Sales miss the line by $290,000, so the kick-out right opens.
• The payback: exercising the kick-out at the end of year two means three of the five amortization years remain. The unamortized balance is three-fifths of $96,000: $57,600, or $18.00 a square foot. The lease makes that amount — sometimes with unamortized leasing commissions added — payable as the price of termination, so the landlord recovers the build-out money it fronted for a tenant leaving early.
• The go-dark alternative: suppose the same tenant instead goes dark under a go-dark right, without terminating. It keeps paying the full $89,600 a year plus NNN charges for a store that never opens. The landlord's percentage rent drops to zero, neighboring co-tenancy clocks start running, and the landlord waits on the one remedy the lease gave it — recapture, below.
• The recapture trigger: the lease lets the landlord terminate and take the space back if the tenant stays dark for 180 consecutive days. At day 180 the landlord may elect recapture inside its notice window; the tenant can usually cure by reopening and operating for a stated period. If it stays dark, the landlord reclaims space it can re-lease to a tenant that will actually open.

Recapture, cure, and payback: what the landlord negotiates back

• A shorter fuse, carefully defined: landlords push the dark period down — 90 or 120 days instead of 180 — and define what counts as dark: closed to the public, not a seasonal closure, a permitted remodel closure, or a casualty shutdown. Tenants push the other way and carve those same events out. The definition, not the number, is where most of the fight sits.
• A real cure, once: a well-drawn recapture right gives the tenant one cure — reopen within a stated period after notice and stay open for a stated stretch — not an endless right to flicker open for a weekend and reset the clock.
• The payback schedule belongs in an exhibit: the unamortized balance should be computable on any date from the lease alone — original TI amount, amortization period, and the resulting monthly balance — the same discipline an TI allowance exhibit applies to the build-out itself. A payback argued from invoices at exit gets negotiated twice.

What to negotiate at signing, before anyone wants out

1. Set the threshold off real sales history. A kick-out line the store already misses is a free exit; a line it can never miss is decoration. Tenants bring trailing sales by store; landlords test the threshold against comparable tenants, and both sides state the measurement period, the sales definition, and the audit right behind the tenant's sales reports.
2. Trade the go-dark right for a recapture right. The balanced retail bargain is freedom to close paired with the landlord's right to take the space back after a stated dark period. A go-dark right with no recapture leaves the landlord renting to a shuttered store for years.
3. Write the payback before the TI is spent. State the TI amount, the straight-line schedule, and exactly which costs — TI only, or TI plus commissions — come back on a kick-out, stepping the amount down as the term runs. Price the whole exit inside the effective rent comparison at signing, when both parties still want the deal.
4. Coordinate with co-tenancy and exclusives. Check whether a dark tenant still counts as operating for the neighbors' co-tenancy tests, and whether its exclusive use still blocks a replacement tenant while it sits dark. A dark tenant that keeps its exclusive is holding a location hostage; most landlords negotiate the exclusive to lapse while the store is dark.
5. Give the landlord a replacement path. Notice periods long enough to market the space, cooperation with showings, and surrender conditions stated in advance turn a kick-out from a surprise vacancy into a planned re-leasing — and are the terms a landlord trades threshold flexibility to get.

For owners: what exit rights do to value

Exit rights are deductions a buyer finds in the lease file. A rent roll full of go-dark rights with no recapture, and kick-out thresholds set below current sales, underwrites to a lower price because the income can legally stop — the same way a clean expense stop and base year structure supports value from the cost side. Owners who pair every go-dark right with a dated recapture trigger, state every payback on a schedule, and keep thresholds tied to demonstrated sales hold leases a buyer's lender can believe.

Cho nhà đầu tư và chủ doanh nghiệp người Việt

Go-dark là quyền đóng cửa tiệm — khóa cửa, dọn hàng, tắt bảng hiệu — trong khi hợp đồng vẫn còn hiệu lực và tiền thuê vẫn phải trả đủ. Điều khoản ngược lại là continuous-operation covenant, cam kết phải mở cửa hoạt động liên tục theo giờ quy định. Kick-out đi xa hơn: nếu doanh thu của tiệm dưới một ngưỡng đã thỏa thuận trong kỳ đo lường, người thuê được chấm dứt hợp đồng trước hạn. Đổi lại, chủ đất thường thương lượng quyền recapture — thu hồi mặt bằng nếu tiệm đóng cửa liên tiếp quá một số ngày — và quyền được hoàn trả phần chi phí hỗ trợ cải tạo (TI) chưa khấu hao khi người thuê rời đi sớm. Trong ví dụ minh họa của trang này, mặt bằng 3.200 SF thuê ở mức $28,00/SF, tức $89.600 mỗi năm; chủ đất cấp TI $96.000 ($30,00/SF), khấu hao đường thẳng trong năm năm, tức $19.200 mỗi năm.

Cách tính trong ví dụ: ngưỡng kick-out là $450/SF, nhân với 3.200 SF thành $1.440.000 doanh thu; doanh thu thực tế chỉ đạt $1.150.000, tức $359,38/SF, thấp hơn ngưỡng $290.000 nên quyền chấm dứt được mở. Người thuê rời đi cuối năm thứ hai, khi ba phần năm của TI chưa khấu hao, nên phải hoàn trả $57.600 ($18,00/SF). Nếu tiệm chỉ đóng cửa mà không chấm dứt, tiệm vẫn trả đủ $89.600 mỗi năm cộng chi phí NNN, phần trăm tiền thuê theo doanh thu của chủ đất về zero vì tiệm không bán hàng, và sau 180 ngày đóng cửa liên tiếp, chủ đất có quyền thu hồi mặt bằng. Bài học cho chủ doanh nghiệp người Việt: thương lượng ngay khi ký — ngưỡng doanh thu và cách đo, số ngày được đóng cửa trước khi bị thu hồi, lịch hoàn trả TI theo từng năm, và điều khoản độc quyền có còn giữ khi tiệm đang đóng hay không. Đây là thông tin giáo dục chung, không phải tư vấn pháp lý hay thuế; hãy nhờ luật sư và CPA xem hợp đồng trước khi ký.

Frequently asked questions

What is a go-dark right, and how is it different from a continuous-operation covenant?

A go-dark right lets a tenant stop operating — close the store, remove the inventory, turn off the sign — while the lease stays in force and rent keeps coming due in full. A continuous-operation covenant is the opposite promise: the tenant must stay open for stated hours during the term. Pair the right with no covenant and the landlord holds a paying but dark store; pair the covenant with no right and a closing is a breach, sometimes with a termination or recapture remedy.

What is a landlord recapture right after a tenant goes dark?

A recapture right lets the landlord take the space back — terminate the lease as to that premises — if the tenant stays dark past a stated trigger, 180 consecutive days in the worked example on this page. The notice usually opens a cure window: reopen and operate for a stated period and the recapture dies; stay dark and the landlord reclaims a location it can re-lease. Tenants negotiate the trigger long, exclude remodels and casualty closures, and require the landlord to elect within a short window or lose the right.

How does a kick-out clause work, and what does the tenant repay when it exercises one?

A kick-out clause gives the tenant a termination right if gross sales fall below a stated threshold in a stated period. In the worked example, the threshold is $450 a square foot — $1,440,000 on 3,200 SF — and actual sales of $1,150,000, or $359.38 a square foot, fall below it, so the right opens. The price of using it is usually a payback of the landlord's unamortized deal costs: the tenant repays $57,600, the three-fifths of its $96,000 tenant-improvement allowance still unamortized when it exits at the end of year two.

How do go-dark and kick-out rights interact with co-tenancy and percentage rent?

A dark tenant is still a tenant on paper, but co-tenancy clauses are usually written on named tenants being open and operating, so one dark anchor or a cluster of dark in-line stores can open co-tenancy remedies — rent relief or termination rights — for everyone else. Percentage rent collapses at the same time: it is a percentage of gross sales, and a closed store reports zero sales, so the landlord's percentage rent from that space is zero for as long as it stays dark, even though base rent continues.

Điều khoản go-dark và kick-out là gì, và chủ doanh nghiệp người Việt cần nhớ điều gì nhất khi ký hợp đồng thuê mặt bằng bán lẻ ở Georgia?

Go-dark là quyền đóng cửa tiệm nhưng vẫn trả tiền thuê; kick-out là quyền chấm dứt hợp đồng nếu doanh thu dưới một ngưỡng đã thỏa thuận. Trong ví dụ của trang này, mặt bằng 3.200 SF thuê $28,00/SF, tức $89.600 mỗi năm; ngưỡng kick-out là $450/SF, tức $1.440.000 doanh thu, nhưng doanh thu thực tế chỉ $1.150.000 — $359,38/SF — nên quyền chấm dứt được mở, và người thuê phải hoàn trả $57.600, là phần chưa khấu hao của khoản hỗ trợ cải tạo $96.000 sau hai năm của hợp đồng năm năm. Điều cần nhớ nhất là thương lượng ngay khi ký: số ngày đóng cửa tối đa trước khi chủ đất thu hồi mặt bằng, ngưỡng doanh thu và cách tính, số tiền phải hoàn trả khi dùng kick-out, và ảnh hưởng đến điều khoản co-tenancy của các tiệm lân cận. Đây là thông tin giáo dục chung, không phải tư vấn pháp lý.