CRE glossary
Recapture rights
Recapture rights are a contractual provision that gives the landlord the option to terminate (or 'recapture') a portion of the leased premises when the tenant proposes to sublease or assign the space. Instead of approving the sublease/assignment, the landlord can take back the space directly and re-lease it themselves.
The recapture trigger is usually a sublease or assignment notice from the tenant. The lease specifies a window (often 30–60 days) in which the landlord must elect to: (a) approve the sublease, (b) recapture the space, or (c) reject the proposed subtenant for cause.
Tenants negotiating recapture should focus on what triggers it. Best for tenants: only triggers on full assignment, not sublease at all. Better: triggers only on sublease > 50% of premises or > 50% of remaining term. Worst: any sublease triggers recapture.
The economic battleground is profit-sharing on profitable subleases. If recapture isn't triggered, the lease typically requires the tenant to share excess sublease profit with the landlord (50–75% to landlord is common). Sophisticated tenants negotiate caps or carve out specific subtypes.
Example
- Trigger
- Sublease > 50% of premises OR > 50% of term
- Election window
- 60 days from tenant notice
- Profit-share
- 50% to landlord (after costs)
- Exclusion
- Related-party assignments
Broker perspective
Recapture rights are one of the most overlooked tenant-unfriendly provisions in commercial leases. Scrutinize at LOI: trigger threshold (50%+ of premises), profit-share percentage (cap landlord's take at 50%), exclusions (related-party, change of control, short-term).
Frequently asked
People also ask
Why do landlords want recapture rights?
Control over who occupies space, plus capturing upside if market has risen since lease was signed.
Recapture vs assignment consent?
Consent is the right to approve or reject a subtenant. Recapture is the right to take the space back instead.
Can I structure around recapture?
Sometimes. Occupancy licenses or related-party assignments can avoid the trigger. Confirm with attorney.
Does it apply to a 10% sublease?
Depends on lease. Worst clauses recapture on any sublease; better clauses only trigger on > 50%.
Related terms
Sublease
An existing tenant rents space to a new occupant under the umbrella of the original lease, common when companies downsize.
Assignment
Tenant transfers the lease in full to a new party, most common during M&A, sale of business, or corporate restructuring.
Right of first offer (ROFO)
Tenant's right to receive the first chance to lease a defined space, before the landlord markets it externally.
See recapture rights extracted from a real lease.
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