Kick-Out Clause

How the mechanism works

A typical tenant-side kick-out names a measuring period (say, a twelve-month stretch ending a few years into the term), a gross sales threshold, and an exercise window. If sales for the measuring period fall short, the tenant may deliver a termination notice within the window, with the lease ending some months later. Many versions require a termination payment — commonly sized to repay the landlord's unamortized tenant improvement allowance and brokerage commissions — so the exit is not free.

The clause is the retail counterpart to a hedge: national tenants entering an unproven center use it to cap downside, and landlords concede it to land a tenant they want. The landlord-side version serves a different purpose — freeing a well-located space from a tenant whose sales, and therefore whose percentage rent, will never materialize.

What to watch for

• One-time versus rolling rights — many kick-outs can be exercised only once, after a single named measuring period; miss the window and the right is gone.
• The definition of gross sales — it should line up with the percentage-rent definition and its exclusions, since both draw on the same sales reports.
• Conditions to exercise — the tenant is often required to have operated continuously and to be free of default for the right to be available.
• Interplay with co-tenancy remedies — a tenant already paying alternative rent under a co-tenancy failure may have separate and overlapping termination paths.

In your documents

Kick-outs are quiet clauses with loud consequences: nothing happens for years, then a measuring period closes and a short exercise window opens. Across a retail portfolio, each one has its own dates, thresholds, and notice mechanics — critical-date tracking surfaces those windows, and source-linked answers let you confirm the exact conditions in the lease before anyone relies on a summary.