A go dark clause lets a retail tenant stop operating while continuing to pay rent. A kick-out clause lets a party end the lease outright when sales fall below an agreed threshold. One is permission to close the doors; the other is permission to leave. They get confused constantly because both show up in the same negotiation, both are exceptions to the landlord's basic expectation that a store stays open and pays, and a single lease often carries both. The practical difference is what happens to the rent obligation: going dark does not touch it, and a kick-out extinguishes it.
Both are also easy to lose in a portfolio, because neither one is a date. A renewal option announces itself with a deadline. A go dark right and a kick-out right sit dormant until a business condition arises, and by then the lease is in a filing cabinet and the person who negotiated it has left.
What a go dark clause does
Most retail leases contain a continuous operation covenant: the tenant agrees to keep the premises open for business, during stated hours, for the term. The covenant exists because a shopping center is worth more when it is full and busy, and a landlord collecting percentage rent has a direct financial stake in the tenant actually trading.
A go dark clause is the negotiated carve-out from that covenant. It says the tenant may cease operations without being in default. Rent keeps running. So do the other obligations that have nothing to do with trading: repair and maintenance, insurance, taxes and common area charges. The tenant is buying the right to stop losing money on staff and inventory in an underperforming store, not the right to walk away from the lease.
Landlords resist it for reasons that are more about the center than the individual space. A dark unit reads as failure to shoppers, it drops foot traffic for the neighbors, and it can trip the co-tenancy clauses in other leases if the dark tenant is named or the occupancy percentage falls. One closed store can therefore reduce rent in several other units without anyone signing anything.
What landlords negotiate into a go dark right
When the right is granted, it usually comes fenced. Cox Castle, a commercial real estate firm that publishes on retail lease negotiation, sets out the standard protections, and they map closely to what shows up in practice:
- An opening covenant, at minimum one day. The tenant must open the store fully fixtured, stocked, staffed and merchandised before any right to close applies. This stops a tenant taking the space and never trading.
- An agreed operating period first. Where the landlord has leverage, the right does not activate until the tenant has traded for an agreed run, commonly negotiated somewhere in the one to five year range.
- Advance written notice, typically 90 to 180 days. The notice period exists so the landlord can start looking for a replacement before the unit goes dark.
- No exercise while in default. The tenant must be current, beyond applicable notice and cure periods, at the time it exercises.
- A landlord recapture right. This is the important one. If the tenant goes dark, the landlord may take the space back and re-let it, usually on its own notice period.
- No exercise during option periods. A tenant that has just extended should not immediately close.
Recapture is what makes the clause a genuine two-way bargain rather than a giveaway. The tenant gets to stop trading; the landlord gets to end the lease and put a working tenant in. Where recapture is on the table, the parties then argue about money: the landlord commonly seeks reimbursement of the unamortized tenant improvement allowance and brokerage commissions it paid to get the tenant in, on the reasonable view that it funded a deal the tenant is cutting short.
What a kick-out clause does
A kick-out clause is a conditional termination right tied to performance. If gross sales at the premises fail to reach a stated figure over a stated measurement period, the holder of the right may terminate the lease early, usually on notice and often on payment of a fee.
Three drafting points do all the work:
The threshold has to be a number. Gross monthly sales below a specific dollar figure, or annual sales below a stated amount, measured against a definition of gross sales that already exists in the lease if there is percentage rent. A qualitative standard like insufficient sales is an invitation to litigate.
The measurement window has to strip out seasonality. Retail sales are not evenly distributed across a year, and a threshold measured over a short window can be failed by a slow spring in an otherwise healthy store. A twelve month measurement is the common answer, sometimes with a requirement that the shortfall be continuous.
The right usually opens at a defined point in the term. A kick-out that could be exercised in year one would give the tenant a free option on the whole deal. Measuring after the store has had time to establish, commonly around the third year, is the usual compromise.
Kick-outs are frequently mutual, which surprises tenants. If the landlord is collecting percentage rent, a chronically underperforming tenant is costing it revenue and occupying space a stronger operator could use. So the same sales trigger that lets a struggling tenant leave can let the landlord remove it.
The termination fee is where the negotiation lands. It typically covers the landlord's unrecovered deal costs: the unamortized improvement allowance and commissions, sometimes with a few months of rent. A tenant negotiating this should push for a fee that amortizes down over the term rather than a flat number, since the landlord's unrecovered cost genuinely falls each year.
Go dark clause vs kick-out clause: the differences that matter
| Go dark clause | Kick-out clause | |
|---|---|---|
| What it permits | Ceasing operations at the premises | Terminating the lease early |
| Rent after exercise | Continues in full | Ends at the termination date |
| Trigger | Tenant decision, sometimes after an agreed operating period | Objective sales threshold missed over a measurement period |
| Who typically holds it | Tenant | Often both parties |
| Typical notice | 90 to 180 days | A stated window after the measurement period closes |
| Money on exercise | Rent continues; landlord may seek unamortized costs if it recaptures | Termination fee, commonly unamortized TI and commissions |
| Landlord counter-right | Recapture and re-let | Its own mirror termination right |
A lease can contain both, and the interaction is worth reading carefully. A tenant that goes dark will usually stop generating sales, which can then trip the kick-out threshold, which may hand the landlord a termination right it would not otherwise have had. Tenants who negotiate a go dark right and a mutual kick-out without reading them together sometimes create exactly the exit they were trying to prevent.
Frequently asked questions
What does it mean when a tenant goes dark?
It means the tenant has ceased operating at the premises while the lease remains in effect. The store is closed, but the tenant continues to pay rent and to perform its other obligations under the lease, such as insurance and maintenance. Going dark is a business decision to stop trading at a loss, not a termination of the lease or a release from rent.
Is a go dark clause the same as a continuous operation covenant?
No, they are opposites. A continuous operation covenant obliges the tenant to keep the premises open and trading. A go dark clause is the negotiated exception that permits the tenant to stop without being in default. If a lease is silent on going dark and contains a continuous operation covenant, closing the store is a breach.
Can a landlord stop a tenant from going dark?
If the lease has a continuous operation covenant and no go dark right, yes, the closure is a default and the landlord has its usual remedies. Where a go dark right exists, the landlord generally cannot prevent the closure but will have negotiated a recapture right instead, allowing it to take the space back and re-let it rather than sit with a dark unit paying rent.
What is a kick-out clause in a commercial lease?
It is an early termination right that activates when gross sales at the premises fall below an agreed threshold over an agreed measurement period. It is most common in retail leases where the landlord also takes percentage rent. The right may sit with the tenant, the landlord, or both, and exercising it usually requires notice plus a termination fee covering the landlord's unamortized deal costs.
When can a kick-out clause be exercised?
Only after the measurement period the lease specifies has run and the sales threshold has been missed, and only within the notice window that follows. Most kick-outs are drafted so the earliest possible exercise sits a few years into the term, commonly around year three, so the store has a fair chance to establish before its performance is judged.
Do you still pay rent after going dark?
Yes. That is the defining feature of a go dark right. The tenant is buying relief from the obligation to operate, not from the obligation to pay. Rent, common area charges, insurance, taxes and repair obligations all continue. If the landlord exercises a recapture right in response, rent stops at the recapture date, but that is a separate event.
What to abstract, and why these two clauses get missed
Neither clause behaves like the fields most abstracts are built around. A commencement date is a date. A go dark right is a conditional permission with several qualifying facts attached, and a kick-out is a formula waiting on data the lease does not contain. Abstract them as a small structured set rather than a sentence of summary:
- Go dark: does the right exist, is there an opening covenant, is there a minimum operating period before it activates, notice days required, whether it is barred during option periods, whether the landlord has recapture, and what the landlord recovers on recapture.
- Kick-out: the sales threshold as a number, the definition of gross sales it references, the measurement period and its start, who holds the right, the notice window, and how the termination fee is calculated.
- The link between them: whether going dark affects the sales measurement, and whether either right survives an assignment or applies only to the original tenant.
The reason these get missed is mundane. They live deep in the lease, often in the miscellaneous or additional provisions section rather than under a heading anyone searches for, and they are frequently added by amendment rather than appearing in the original document. A portfolio abstracted from original leases alone will not show them at all.
Once captured, the clause still needs an owner. When a tenant sends a go dark notice or a kick-out notice, it arrives as an ordinary letter or email with a clock already running on it. On a small team someone forwards it. On a portfolio team it needs a real intake path so a dated notice gets routed to the asset manager responsible for that center rather than sitting in a shared inbox until the response window has closed.
This is the case for reading these provisions out of every lease and amendment as structured fields instead of trusting that someone remembers them. Our automated commercial lease abstraction software extracts option and exit provisions with a link back to the clause each value came from, so the sales threshold on a kick-out is checkable against the language in seconds rather than requiring a re-read. For the wider set of retail provisions that behave this way, see lease abstraction for retail portfolios and the related exclusive use clause.