Kick-Out Clause

What triggers a kick-out right

The most common version is a sales-threshold kick-out: the lease sets a minimum gross sales figure, often expressed as an annual dollar amount or as sales per square foot, and tests the tenant's actual performance against it over one or more specified lease years — frequently years two through four, giving a new store time to ramp up before the test applies. If cumulative or average sales over the test period fall short, the tenant gets a window to terminate.

A second, distinct trigger ties the kick-out to co-tenancy: the tenant may terminate if a named anchor closes, an anchor space sits dark past a stated period, or overall center occupancy drops below a stated percentage. Some leases bundle both triggers under one kick-out article; others keep sales-based and co-tenancy-based termination rights entirely separate, with different notice mechanics for each. The two are easy to conflate in an abstract, but they test different facts and need to be tracked as separate rights.

The right almost always belongs to the tenant. Landlord-side kick-outs exist but are rare, typically appearing in short-term or specialty-use spaces where the landlord wants flexibility to redevelop or re-tenant if the space underperforms.

Worked example: sales-threshold trigger

A 3,000-square-foot inline tenant's lease sets a kick-out sales threshold of $300 per square foot in average annual gross sales, tested over lease years three and four combined — a $900,000 two-year floor. The tenant must report gross sales to the landlord within 30 days of each lease-year end.

Actual gross sales come in at $410,000 in year three and $440,000 in year four, totaling $850,000 against the $900,000 floor — a shortfall. Under the clause, the tenant has 60 days after delivering the year-four sales report to send a termination notice; if it does, the lease ends 120 days after that notice, with no further rent due beyond the termination date and no penalty, since kick-outs are not defaults.

Many clauses give the landlord a cure right at this stage: within a stated window after receiving the tenant's termination notice, the landlord can defeat the kick-out by offering a rent concession — a reduced fixed rent, or a switch to percentage-rent-only — sufficient to keep the tenant in place. If the landlord makes that offer and the tenant accepts, the termination right is void for that test period and does not reappear until the next scheduled test, if there is one.

Where kick-out disputes come from

• ✓Measurement period ambiguity: whether the test uses a single lease year, a trailing average, or a cumulative total over multiple years produces very different outcomes from the same sales data — get the exact period wording, not just the threshold number
• ✓Strict, self-executing deadlines: kick-out notice windows are frequently time-of-essence with no cure for a late tenant notice, unlike most lease defaults — missing the window can extinguish the right entirely for that test cycle
• ✓Landlord cure/recapture rights: a lease that lets the landlord defeat the kick-out with a rent concession changes the tenant's real leverage; an abstract that records the threshold but not the landlord's cure right materially overstates the tenant's exit certainty
• ✓What counts as "gross sales": exclusions for e-commerce fulfilled from the store, returns, sales tax, and employee discounts vary by lease and can swing a close test either way
• ✓Confusing kick-out with co-tenancy: a co-tenancy failure suspends or reduces rent as its primary remedy and may or may not include a termination right; a kick-out is fundamentally a termination mechanism keyed to sales performance — treat them as separate abstract fields even when one lease has both

Why this belongs in the abstract, not just the lease file

A kick-out right changes what a rent roll is worth: a tenant with an active, unexpired sales-threshold test is a different underwriting risk than one with none, and the difference does not show up anywhere in the rent schedule itself. Property managers need the test period, the threshold, the notice deadline, and any landlord cure right on hand well before the test date — not discovered when a termination notice arrives.

Because the test date and notice deadline are hard dates that drive real decisions, our specialists record the exact sales threshold, measurement period, reporting deadline, tenant notice window, and any landlord cure mechanics as separate abstract fields, each cited to the page in the lease where it appears, so the critical-date calendar and the abstract agree.