What Is Co-Tenancy? A Landlord’s Guide to Risks, Clauses, and Compliance

In retail real estate, some of the most impactful lease provisions aren’t about rent or term—they’re about other tenants.

Co-tenancy clauses, which tie a tenant’s rent or operating obligations to the presence or performance of neighboring businesses, are one of the most common—and misunderstood—sources of risk in shopping centers today. They rarely make the rent roll, often live deep in lease amendments, and only surface when something goes wrong.

By then, it’s usually too late.

What Co-Tenancy Really Means

At their core, co-tenancy clauses are about shared value. Retail tenants—especially those in open-air centers—thrive on proximity to anchors and foot traffic generators. A discount apparel chain may rely on a steady stream of customers from the neighboring grocery store. A quick-service restaurant may only sign a lease if the fitness center next door guarantees a baseline of daily activity.

So tenants protect themselves. They write in lease language that says: If that grocer leaves, or if occupancy drops below 60%, I want a rent break. Or an out.

These clauses serve a purpose. But for landlords and asset managers, especially those inheriting older or layered leases, co-tenancy provisions can be difficult to track and devastating if missed.

The Real-World Risks

Take a real estate firm that acquired a suburban power center with 92% occupancy. Solid rent roll, reliable anchors, clean acquisition—on paper.

What they didn’t catch was that five tenants had co-tenancy clauses tied to a now-vacant sporting goods retailer. Three were paying reduced rent. Two had already sent notice to terminate early.

Within the first 90 days post-close, nearly half a million dollars in expected revenue disappeared—not because of market conditions, but because of fine print.

Or consider the team managing a center where an anchor tenant quietly shut its doors. No fanfare, just a sign in the window and an empty box. Lease obligations technically remained in place, but across the plaza, six small-shop tenants had clauses that required active operation by the anchor. No foot traffic meant automatic rent relief—and no cure period if the vacancy went unnoticed.

The Problem with Staying Reactive

The issue isn’t that co-tenancy clauses exist. It’s that most owners don’t have a reliable, scalable way to track them.

They’re buried in scanned PDFs. Amended over time. Triggered by vague language like “reasonably equivalent replacement” or “comparable national tenant.” And when the team managing a property changes—as it often does—knowledge of those clauses disappears.

That’s when the exposure starts to build.

How Prophia Helps

Prophia gives owners and operators the ability to surface, structure, and stay ahead of co-tenancy clauses across the portfolio—without relying on memory or static spreadsheets.

Using AI, Prophia identifies co-tenancy provisions from original leases, amendments, and even decades-old documents. It extracts the key terms—what conditions apply, what thresholds matter, what options are available to the tenant—and links them directly to the source language, so there’s never ambiguity about where the data came from.

It’s not just about surfacing a clause. It’s about building confidence in your lease data, and giving your team the tools to act on it before it becomes a problem.

Co-Tenancy in the Age of Turnover

Retail centers are changing. Tenants are more fluid, anchors are less permanent, and co-tenancy triggers are more likely than ever to get hit.

For modern owners—especially those acquiring legacy assets or repositioning aging centers—tracking these clauses can’t be a back-office task. It has to be part of how you operate: proactive, precise, and powered by complete lease visibility.

With Prophia, that’s not only possible—it’s built in.