Most commercial lease agreements contain provisions governing how the property will be maintained and which party is responsible for these costs. In certain types of commercial leases, the purposes for which the premises can and cannot be used is a critical part of the agreement between the parties. These provisions, which are typically found in shopping center leases, are referred to as “use” and “exclusive use” clauses.
Use clause. Use clauses are designed to place some kind of restriction on the use of the commercial space by the tenant. When landlords insist on including these types of clauses, tenants should generally attempt to draft the restrictions in the broadest possible terms. The restriction can be in the form of either (i) a requirement to conduct business in a certain way or (ii) a limitation on performing specified actions in connection with the business. The former clause stipulates the activities that are permitted under the lease. This kind of agreement may preclude activities you want to do in the future, but are not currently engaged in the present. The second type of restriction describes the activities you are prohibited from undertaking in your business. These forbidden activities may be categorically broad (such as disallowing sales) or narrow in scope (such as disallowing the sale of a certain product.) Use clauses that restrict tenants’ activities may be implemented as a result of the existence of an exclusive use clause, as discussed below.
Exclusive use clause. An exclusive use clause allows a tenant to prevent another tenant, usually in a common shopping area, from engaging in the same business. The landlord, under this provision, agrees to preclude another business from competing directly with the tenant who has secured an exclusive use clause. If a fellow tenant has succeeded in obtaining an exclusive use provision (for selling women’s shoes, for example), then other tenants who share that retail space will generally have a use clause restricting that activity (the sale of women’s shoes). The lease should contain an enforcement mechanism that provides specific remedies available to the tenant if the exclusive use clause is violated or the landlord does not enforce it.
Contact Shane Coons at 949-333-0900 or visit his website at www.ShaneCoonsLaw.com to find out more about his practice.