PHILADELPHIA—An arbitration panel's recent decision has reaffirmed the business expectations of national retailers who have long relied on co-tenancy clauses to avoid collateral damage when a shopping center anchor store goes out of business. In a time of changing market conditions, this sends a message to landlords that they ignore these agreed upon protections at their peril.

A panel of three arbitrators from the American Arbitration Association in June enforced a co-tenancy clause against a Pennsylvania landlord, awarding retailer Ross Dress for Less $1.9 million in damages, including attorneys' fees. The award, confirmed by the Eastern District of Pennsylvania in September, reflects the longstanding belief among real estate professionals that co-tenancy clauses are alive and well.

A common provision of shopping center leases, co-tenancy clauses are designed to protect tenants' business interests by providing a rent reduction or lease termination if anchor stores cease operations. They are based on the premise that successful shopping centers usually have a complementary tenant mix, strong anchor tenants and high occupancy rates. A major store closure means less foot traffic for the remaining tenants.