Use and exclusive-use clauses in commercial leases

On Behalf of | Jun 5, 2024 | Commercial Real Estate

Residential leases are pretty much a “take it or leave it” kind of situation, largely because there are protections for consumers built into the laws. Commercial leases, however, are different – almost everything is negotiable.

If you’re seeking a commercial lease, one area of concern may be a use or exclusive-use clause, especially if you’re looking at renting in a large plaza, professional building or shopping center with a mix of tenants.

How do use clauses work?

Essentially, a use clause limits what you, as a tenant, can do within the space you rent. They’re often designed to prevent a tenant from violating zoning laws or creating legal issues for the landlord by infringing on another tenant’s agreement.

They are also used to maintain the right mix of businesses within a complex or building. For example, a commercial landlord may want to keep only professional practices – lawyers, doctors, accountants and the like – in a building, so that the building maintains a certain prestige. To that end, a use clause may prevent a tenant from offering quasi-professional services, like massage or yoga.

What’s an exclusive-use clause?

This kind of clause grants you the exclusive right to operate a specific business within the building or plaza. It eliminates the possibility of a direct competitor moving in and stealing your customers away.

For example, if you operate a coffee and pastry shop, you could ask for an exclusive use clause that would prevent a bookstore from moving into the same shopping plaza and setting up a coffee and pastry bar to encourage customers to stay longer.

Negotiating a commercial lease can take time. You may need to reach out for legal guidance to discuss your options.