DFW Retail Lease Litigation: Exclusive Use, Co-Tenancy, CAM, and Retail Landlord Enforcement

Retail leasing in the Dallas-Fort Worth metroplex is more provision-heavy than most other categories of commercial leasing in Texas. The standard retail lease includes exclusive-use clauses, co-tenancy clauses, anchor tenant requirements, percentage rent provisions, operating covenant requirements, prohibited use restrictions, CAM and NNN allocation formulas, signage rules, hours-of-operation requirements, and many other provisions that simply don’t appear in office, industrial, or residential leasing. Disputes in retail leasing accordingly center on those provisions far more than on the substantive law of contract. The rest of this page covers the kinds of retail lease disputes Cook Keith & Davis handles for DFW retail landlords, how the major retail-specific provisions actually operate in litigation, and where retail landlords most often gain or lose ground.

In our retail leasing practice, the most common dispute we see isn’t a clean rent default. It’s a tenant invoking a co-tenancy clause to demand abatement when an anchor tenant departs, or a tenant claiming an exclusive-use violation by another tenant’s expanded offering. The clean rent defaults proceed through Chapter 24 forcible detainer. The provision-driven disputes proceed through negotiation and, if necessary, district court litigation.

The DFW retail market

DFW has one of the strongest retail leasing markets in the country, with significant inventory across multiple retail formats:

• Power centers (big-box anchored with junior anchors and inline space).
• Lifestyle centers (open-air mixed retail and entertainment).
• Grocery-anchored neighborhood centers.
• Strip retail and inline shopping centers.
• Mixed-use retail (retail integrated with office and residential).

Each format produces different lease provision profiles and different dispute patterns. Grocery-anchored centers tend to be heavy on exclusive-use clauses and anchor co-tenancy. Power centers tend to emphasize co-tenancy and anchor performance. Lifestyle centers and mixed-use produce more disputes around operating standards, hours, and shared facilities.

Exclusive-use clauses

An exclusive-use clause prohibits the landlord from leasing other space in the same center (or, in some leases, a defined market radius) to a tenant whose primary use overlaps the protected tenant’s primary use. Exclusive-use clauses are a frequent source of litigation because they sit at the intersection of:

• The protected tenant’s competitive interest.
• The landlord’s interest in maximizing leasing flexibility.
• The other tenants’ interest in their own permitted uses.

When a tenant claims an exclusive-use violation, the analysis usually centers on:

• Is the alleged competing use within the scope of the exclusive-use clause? Most exclusive-use clauses define the protected use narrowly (specific product categories or merchandise), and many “violations” turn out to be on the margin.
• Did the landlord have notice of the alleged competing use before signing the new lease? Landlords who lease to potentially competing tenants without first reviewing the exclusive-use provisions of existing tenants create avoidable problems.
• What are the remedies under the exclusive-use clause? Some provide for rent abatement; some for termination rights; some for actual damages; some for specific performance (court order requiring the offending tenant to cease the competing use).

We’ve seen exclusive-use disputes resolve at every point on the spectrum, from a phone call between counsel that clarifies that the alleged competing use is not actually covered, to multi-month litigation that produces consent decrees restricting the offending tenant’s merchandise mix.

Co-tenancy clauses

A co-tenancy clause gives the protected tenant remedies if specified conditions in the center fail. The most common types:

• Anchor co-tenancy. The lease specifies named anchor tenants who must continue to operate; if an anchor closes, the protected tenant’s remedies kick in.
• Occupancy co-tenancy. The lease requires a minimum percentage of the center to be occupied or operating; if occupancy drops below the threshold, remedies attach.
• Specific-tenant co-tenancy. The lease names specific tenants that must continue to operate (less common but seen in some retail leases).

Remedies under co-tenancy clauses vary widely:

• Rent reduction (often to percentage rent only).
• Operating covenant suspension (tenant may close).
• Termination right (sometimes immediate, sometimes after a remedy period).
• Damages.

When an anchor closes, the question for the landlord is whether to fight the co-tenancy claim, accept it, or work out a temporary arrangement during the re-anchoring period. The right answer depends on the remedy specified, the market for replacement anchors, and the tenant’s actual financial position.

CAM and NNN disputes in retail

Retail CAM disputes are some of the most common commercial lease disputes we handle. The typical issues:

• The year-end reconciliation calculation is disputed.
• Expense categories are challenged (the tenant claims an expense isn’t a proper CAM expense).
• The allocation methodology is challenged (the tenant claims a different allocation should apply).
• Capital expenses are improperly included in CAM (or, the tenant claims they were).
• The tenant invokes the lease’s audit rights and disputes the audit findings.

Most retail leases have specific CAM definition, audit, and dispute-resolution provisions. The first step in any CAM dispute is to read those provisions carefully against the lease. Many CAM disputes resolve when both sides actually apply the lease’s own audit and reconciliation language to the disputed numbers.

Holdover in retail

Retail holdover situations are particularly expensive because typical retail lease holdover provisions impose damages at 150%, 200%, or even higher multiples of base rent (plus full CAM). For a tenant in a mid-rent retail space, holdover damages can run thousands of dollars per day.

When a retail tenant holds over:

• The landlord should immediately confirm what holdover language applies and what damages multiplier kicks in.
• Notice to vacate may not be required if the lease’s holdover language is clear; check the lease.
• If the landlord has a replacement tenant lined up, the holdover is typically resolved quickly by negotiation. If the landlord doesn’t, the holdover can produce significant damages that need to be calculated and pursued.

Holdover damages can be pursued in district court after the holdover ends, or as part of the JP court forcible detainer if the landlord seeks possession before the holdover concludes.

Percentage rent and operating covenant disputes

Many retail leases include percentage rent (a percentage of the tenant’s gross sales above a defined breakpoint) and operating covenants (requirements that the tenant operate during specified hours and maintain certain standards).

Disputes arise when:

• The tenant claims percentage rent is overstated; landlord audits typically resolve these.
• The tenant claims percentage rent is understated and the landlord owes a refund; lease provisions on audit rights, retention of records, and statute of limitations matter.
• The tenant ceases operating (goes “dark”) and the landlord claims operating-covenant breach. The landlord’s remedies depend on the lease, but typically include termination rights, damages, and sometimes specific performance ordering the tenant to operate.

Dark-store disputes are particularly contentious because the tenant often takes the position that the lease only obligates them to pay rent, while the landlord points to operating covenant and co-tenancy implications. Lease language usually resolves the dispute but doesn’t always.

What separates a winning retail case from a losing one

In our retail leasing practice, the cases that work out cleanly for the landlord share certain characteristics:

• Clear, well-drafted lease provisions on the disputed issues. Ambiguous exclusive-use language and ambiguous co-tenancy language are the source of most expensive retail litigation.
• Consistent enforcement of lease provisions over time. Landlords who enforce some retail provisions selectively create waiver and estoppel issues that hurt them when they try to enforce later.
• Documentation of the alleged breach. In exclusive-use cases, photographs of the offending tenant’s merchandise mix; in co-tenancy cases, occupancy reports and anchor status documentation; in CAM cases, the underlying invoices and allocation records.
• Prompt response. Retail lease disputes that linger for months without landlord response typically produce worse outcomes than disputes addressed within weeks of becoming known.

What we tell DFW retail landlord clients: the lease drafting decisions you make at signing will determine 80% of how disputes play out years later. Spending counsel time on lease drafting is cheaper than spending counsel time on retail litigation.