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Understanding use and exclusive use clauses in commercial leases

| Feb 18, 2021 | Commercial Real Estate

Commercial leases are tricky. Residential tenants enjoy numerous protections in the law against provisions in their leases that unfairly limit their rights, but commercial tenants are largely on their own when it comes to negotiations.

Two of the biggest issues an inexperienced commercial tenant can encounter are use and exclusive use clauses. Knowing what these are can save you a lot of trouble (and money) down the road.

What’s a use clause?

This gives your landlord the right to tell you how you can — and can’t — use the space you rent. It can set rules on your:

  • Advertising
  • Business days and hours
  • Product lines
  • Services

For example, it isn’t uncommon for a use clause in a shopping mall property leawe to require specific opening and closing hours. That benefits the landlord (and the other tenants) by making it easy for customers to know when the businesses will be open.

What’s an exclusive use clause?

These can be great if you have one because they make sure that no other tenant in the same commercial plaza or building will be in direct competition with your services or products. Unfortunately, you probably won’t get one unless you have an established track record for your business and are a high-profile tenant that the landlord wants to keep. More likely, you may find your opportunities to expand your own product line or services limited by the exclusive use clause of another tenant.

When evaluating a commercial lease, it’s smart to take your time. It’s even smarter to work with an experienced real estate attorney.