Do most lease agreements include a recapture clause that allows a lessor to terminate a lease? Can the clause be subject to interpretation such that a lessor can take advantage of the clause to get rid of a tenant?
Recapture clauses are usually contained in long-term commercial leases to large corporate tenants. The primary purpose of the recapture is to give the landlord the option to terminate the lease if the tenant asks the landlord to approve an assignment or sublease. The tenant would make such a request either to get out of its lease obligation or because market rents are higher than the rent currently paid by the tenant and the tenant can make money by subleasing this property and finding cheaper space elsewhere. If the landlord determines that an assignment or sublease of the property to another tenant is more profitable than the existing lease with the current tenant, the landlord would invoke the recapture clause, terminate the lease, and deal with the proposed new tenant
Even though the existing tenant might be forced to forgo the opportunity to make a “profit" from subleasing, it is likely that such a tenant is satisfied simply to be able to walk away from its lease obligation, since that was the tenant's primary motivation in the first place. The specific language of a recapture clause can vary based on how strong a negotiating position is held by the parties. If the tenant is stronger than the landlord (Wal-Mart compared to an individual, for example), the tenant would never agree to an open-ended recapture clause whereby the landlord could arbitrarily terminate the lease if a better deal came along. If the landlord is stronger, the tenant might be forced to agree to a recapture clause, but should be certain that the lease specifies the circumstances that may trigger the recapture right.
Scott Alderman, Broker and President, First Commercial Real Estate, Valdosta, GA