Featured News 2014 Commercial Leases: “Use” and “Exclusive” Clauses

Commercial Leases: “Use” and “Exclusive” Clauses

When you and a landlord are hammering out the details of the lease, you are very likely to come across these two clauses, especially if you are working on a shopping center lease. These clauses usually appear together, and they represent an agreement on what activities you will and will not do. Keep reading to get an overview of these important clauses and how they can affect your business.

Clauses That Can Help Your Business Out

Uses clauses can instruct you on what you have to do, and/or prohibit you from certain actions. A restrictive use clause is, of course, a clause that prohibits. This could mean a clause that says you cannot sell food, or that you cannot sell retail items. The broader the terms of your permitted use of the property, the better. With a restrictive use clause, anything that is not restricted is allowed. The clause can become more restrictive, however, if another tenant in that location has an "exclusive" clause.

An exclusive clause is one that limits the landlord, such as a clause that guarantees one tenant that they will be the only one who can engage in certain activity. This could mean that a tenant and landlord have agreed that this tenant is the only one on the premises who can sell sporting goods. This exclusive clause means that all future tenants will have the restrictive clause telling them that they cannot sell sports items.

Ideally, you could get this clause for yourself, such as if you are an influential, or "anchor" tenant. This can create powerful protections for your business. If getting an exclusive clause is on the table, then you need to make sure that the clause includes terms on how this clause would be enforced if someone else encroaches on your exclusive practice. This could mean something like your rent getting lowered, as well as a provision for no "cure" periods. Above all, you would need to set a figure for monetary damages you would not need to prove; avoid spending costly time in court in order to defend your exclusive clause.

Less Than Ideal Clauses for Your Business

Then there are permissive use clauses, which limit what you can do to specific activities. Anything that is not expressly permitted is thus prohibited. So this means you will have to think of all possible activities you could want to participate in so as to make sure they are included in the clause. Otherwise, you will be limited in how you can expand your business. These clauses end up being more restrictive than the restrictive clauses.

If you need to learn more about your legal rights and/or advice on how to negotiate the legal terms that would be most beneficial for your company, be sure to contact a local real estate attorney as soon as possible. You can find the legal professional you need on our directory today!

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