A recapture clause is a commercial lease provision that lets the landlord take back all or part of the leased space when the tenant requests consent to assign or sublease. Triggered by that request, the landlord can terminate the lease as to the affected space, ending the tenant's obligations and rights for it rather than approving the transfer.
What Is a Recapture Clause?
A recapture clause is a landlord's right to reclaim leased space in response to a tenant's request to assign or sublease. Rather than consenting to the transfer, the landlord terminates the lease for that space and takes it back. The request itself is the trigger, so the tenant's own proposed transfer hands the landlord the option.
The clause exists because a below-market lease is worth more to the landlord recaptured than transferred. If a tenant paying $22 per square foot wants to sublease into a market of $30, the sublease profit would flow to the tenant. Per Commercial Real Estate Loans, a recapture clause lets the landlord terminate the lease early and re-lease the space at the higher market rate instead.
Element | What it defines |
Trigger | The tenant's request to assign or sublease |
Scope | The whole premises or only the portion to be transferred |
Response window | The period in which the landlord must elect to recapture |
Effect | Termination and release of the tenant for the recaptured space |
Why a Recapture Clause Matters
A recapture clause matters because it converts a tenant's flexibility into landlord leverage. A tenant that has outgrown or exited a space assumes it can assign or sublease to recover cost. A recapture clause means the mere request can end the lease for that space, so the tenant may lose the space, the sublease profit, and control of the timing at once.
For the landlord, recapture captures the value of a below-market lease and controls who occupies the building. For an operator underwriting a lease or a rent roll, the quotable point is direct: a recapture clause means a tenant cannot safely test the sublease market, because asking for consent can trigger the landlord's right to take the space back. Per REBusinessOnline, the landlord commonly has 30 days after the transfer request to elect recapture.
Example
A tenant leases 20,000 square feet at $22.00 per square foot, or $440,000 per year, with 4 years left. It wants to sublease 8,000 square feet it no longer uses. Market rent has risen to $30.00. The lease has a recapture clause covering any partial sublease.
Fact | Value |
Space to sublease | 8,000 SF |
Tenant's rent on that space | 8,000 x $22.00 = $176,000 per year |
Current market rent | 8,000 x $30.00 = $240,000 per year |
Annual spread the tenant hoped to capture | $240,000 - $176,000 = $64,000 |
When the tenant requests consent, the landlord elects to recapture within its 30-day window. The tenant is released from the 8,000 square feet and saves $176,000 per year on it, but forfeits the $64,000 annual sublease spread, which is $256,000 across the remaining 4 years. The landlord re-leases at $240,000 and keeps that upside.
Variations and Edge Cases
A recapture clause is not one clause; the trigger, the scope, and the tenant's escape rights all change its bite. The table below covers variants an operator should confirm before relying on assignment or sublease flexibility, because each one shifts how much control the tenant retains.
Variant | Treatment |
Full vs partial | Recapture may apply only to a full assignment, or to any partial sublease |
Percentage floor | Some clauses trigger only if the tenant subleases more than a set share of the space |
Right to rescind | Tenant may negotiate the right to withdraw the transfer request if recapture is elected |
Release of liability | The tenant should be released from all obligations on the recaptured space |
Notice window | Commonly 30 days after the transfer request; a missed election preserves the transfer |
The common tenant error is treating a consent request as harmless. Because the request itself is the trigger, a tenant with a recapture clause should negotiate the right to rescind the request before ever asking, so an unwanted recapture does not become irreversible.
Recapture Clause vs Renewal Option
A recapture clause is often confused with a renewal option, but they run in opposite directions. A recapture clause is the landlord's right to end the lease early for space the tenant tries to transfer. A renewal option is the tenant's right to extend the lease past its term. One lets the landlord take space back; the other lets the tenant keep it.
The distinction is who holds the right and which way it points. A recapture clause shortens the tenant's hold on space it no longer wants but still pays for. A renewal option lengthens the tenant's hold on space it wants to keep. A tenant reading a lease should track both, because recapture governs the exit and the renewal option governs the stay.
Frequently Asked Questions
What triggers a recapture clause?A recapture clause is triggered by the tenant's request for landlord consent to assign the lease or sublease the premises. The request itself, not the completed transfer, is the trigger. In response, the landlord may elect to terminate the lease for the affected space and take it back rather than approving the transfer.
How long does a landlord have to recapture space?The lease sets the window, but it commonly runs 30 days after the tenant's assignment or sublease request. Within that period the landlord elects whether to recapture the space or allow the transfer. If the landlord does not elect within the window, the tenant's proposed assignment or sublease generally proceeds.
Can a tenant negotiate around a recapture clause?Yes. Tenants commonly negotiate the right to rescind a transfer request if the landlord elects to recapture, limit the clause to full assignments or to subleases above a set percentage, and require a full release of liability for the recaptured space. These terms keep a consent request from becoming an irreversible loss of space.
Related Terms
Renewal Option
Letter of Intent
Estoppel Certificate
Co-Tenancy Clause
Right of First Refusal