Commercial leases impose obligations on both commercial tenants and landlords. Tenants must pay rent and cover other costs. Landlords may have to provide certain amenities. Commercial leases tend to include a variety of clauses that are not necessary in residential leases. For example, commercial leases may include a use clause requested by the landlord or an exclusive use clause requested by the tenant.
Those unfamiliar with the jargon used for commercial leases may find the similarity in names for these two inclusions confusing. What is the difference between a use clause and an exclusive use clause?
Use clauses limit business functions
A use clause in a commercial lease typically serves to prevent surprising changes in how a tenant uses the commercial space. A landlord may ask the tenant to outline proposed business operations and may limit the tenant to only those functions when occupying the space rented in the lease. Use clauses can make it difficult for tenants to pivot without landlord approval when market conditions change.
Exclusive use clauses are different, as they protect the tenant from competition. An exclusive use clause generally prevents a landlord from renting another unit in the same building or strip mall to a company that offers the same goods or services as the tenant signing a lease with the exclusive use clause. A shoe store can prevent a competitor from opening up across the mall from them and then taking away a good portion of their business by undercutting their prices.
Both use clauses and exclusive use clauses can be valuable inclusions in commercial leases. Reviewing the terms of a lease and exploring what additions might be beneficial with a skilled legal team can help commercial tenants and landlords protect themselves.