Recapture Clause

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In a contract, a clause permitting the party who grants an interest or right to take it back under certain conditions.


Example: Carter grants a lease to Frank’s Furniture, with rent set at 6% of retail sales. The lease contains a recapture clause whereby Carter can regain the property unless sales are over $1 million per year.

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A provision usually found in percentage leases, especially in shopping-center leases, giving the landlord the right to terminate the lease - thereby recapturing the premises - in the event the tenant does not maintain a specified minimum amount of business. For example, a poorly performing retail shop in a shopping center can damage the shopping center's image and therefore the bottom line of all tenants and the landlord.

Investopedia Says:
A recapture clause is intended to protect a landlord by making sure that tenants maintain a certain amount of revenue. The recapture clause allows a means for an underperforming retail store to be removed, opening the space for a more profitable endeavor. A recapture clause also protects a landlord in an instance where the tenant attempts to sub-lease the property for a profit.

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