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Continuous operation clauses

When it comes to commercial leases, you're essentially on your own to protect yourself against predatory clauses and clauses that -- while not exactly predatory -- are certainly dangerous to your pocketbook. That's why it's important to understand as much as you can about commercial leases before you start to negotiate one, including things like a continuous operations clause.

If you're renting from a landlord in a strip mall or some other type of shopping center, it's in your landlord's advantage to have a continuous operation clause in your contract. It may not, however, be something that you want -- or can afford.

Here are the things that a continuous operation clause can prevent you from doing:

  • Shutting down for three weeks to overhaul your business and train new employees after your brand shifts directions
  • Closing shop in order to take a vacation, attend to a family emergency or to address any other short-term concern
  • Going out of business at that location (while still paying the rent for the remainder of the lease) because the area no longer fits your brand identity
  • Relocating (again, even if you continue to pay the rent at that location) in order to protect your business after the shopping center loses other tenants and foot traffic declines

Continuous operation clauses have some clout because they can accelerate the remainder of your rent and tack on significant (expensive) penalties for noncompliance.

If at all possible, you want to avoid agreeing to a continuous operation clause. If you can't make the deal any other way, you need to negotiate hard to slant things a little more in your favor. For example, you may be able to negotiate terms that give you a reduced rent or allow you to shut your doors if another key tenant leaves or foot traffic declines past a certain point.

You don't have to do all your negotiations alone, however. It's always wisest to get some experienced legal advice about your commercial property leases before you sign on that dotted line.

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