Use and exclusive use clauses in commercial leases

Use and exclusive use clauses in commercial leases

| Oct 11, 2020 | Real Estate Law |

You’ve been looking hard for the right commercial location for your business, and you’ve finally found the spot. Now, all you have to do is negotiate the contract for the lease with the landlord.

This is when things can get tricky. Commercial leases can be vastly more complicated than residential ones, and they often contain terms and clauses that new business owners don’t recognize. Two of those are the “use” and “exclusive use” clauses.

What’s a use clause?

Landlords have a vested interest in making certain that the property attracts plenty of business. Hence, they try to select their tenants carefully. They also add use clauses to leases to restrict how tenants may use the spaces they rent.

A use clause can dictate things like the hours you must open (which is particularly common in indoor malls where the landlords want all the stores to open and close at the same time for maximum convenience), what services or products you can offer (and which ones you cannot) and more. For the most part, you want to avoid any use clause that seems very restrictive and a burden.

What’s an exclusive use clause?

Exclusive use clauses generally benefit the tenant. You don’t want any other tenant in the plaza, shopping center or building to be in direct competition with you. An exclusive use contract guarantees that you are the only one who can operate a certain kind of business or sell certain products.

For example, if you plan to open a store selling CBD products, you may want to negotiate for an exclusive use clause that prevents a gift shop from moving in next door and moving in on your business by offering the same products at a lower price.

Making a mistake with your lease can negatively affect your business for years to come. Make sure that you work with an experienced real estate attorney during the lease negotiation process.