Legal Definitions - recapture clause

A recapture clause is a specific provision within a contract that allows one party to reclaim certain rights, property, or financial benefits under predefined circumstances. These circumstances often involve market conditions or the other party's performance deviating significantly from what was initially agreed upon. Essentially, it provides a mechanism to "take back" or adjust the terms of an agreement to prevent substantial loss or to regain control.

• Example 1 (Commercial Lease - Performance-Based Termination):

  A small boutique clothing store signs a lease for a prime retail space in a busy shopping district. The lease agreement includes a recapture clause stating that if the store's annual gross sales fall below $500,000 for two consecutive years, the landlord has the right to terminate the lease and reclaim the space. This allows the landlord to recapture the property if the tenant is not generating sufficient revenue, potentially to lease it to a more successful business that can better utilize the valuable location.

• Example 2 (Long-Term Supply Contract - Market Price Adjustment):

  A manufacturing company enters into a five-year contract to purchase a specialized raw material from a supplier at a fixed price per unit. However, the contract includes a recapture clause. This clause stipulates that if the global market price for that raw material drops by more than 20% for three consecutive months, the manufacturing company can invoke the clause to renegotiate the per-unit price, ensuring they don't significantly overpay compared to the new market rate. Here, the company is recapturing the financial benefit of the changed market conditions.

• Example 3 (Real Estate Development - Conditional Land Sale):

  A municipal government sells a parcel of land to a developer at a reduced price, with the condition that the developer builds a public library and community garden within three years. The sales contract includes a recapture clause. This clause states that if the developer fails to meet these construction deadlines or significantly alters the approved plans without city consent, the city has the right to repurchase the land at the original reduced price. This allows the city to recapture the property and the opportunity to ensure the intended public amenities are eventually built.