In which scenario would a recapture clause likely be used?

The correct answer highlights a situation in which a recapture clause serves an important function within a lease agreement. A recapture clause is commonly employed to protect landlords when a tenant fails to meet certain performance metrics, such as sales thresholds. This clause allows the landlord to reclaim the leased space if the tenant is not producing enough revenue, thus providing a mechanism for the landlord to regain control of the property and potentially lease it to a more profitable tenant.

This scenario is particularly pertinent in commercial leases, especially those with rent structures tied to the tenant’s sales performance. If a tenant's business is underperforming and unable to meet the agreed-upon sales threshold, the recapture clause offers the landlord an exit strategy from the lease, minimizing financial risk and maximizing the potential for future income.

Other scenarios, such as expansion, lease term conclusion, or property improvements, do not inherently require a recapture clause. Expansion may benefit the property but does not trigger a recapture situation. Lease expiration is a natural point where the lease concludes, and property improvements might enhance value but do not directly relate to the tenant's performance metrics. In contrast, the need for recapture directly correlates with ensuring that the landlord can maintain profitability and control over the leasing situation based on the