In a commercial lease agreement, both the use clause and exclusive use clause are important provisions that define how the leased premises can be used and whether the tenant has exclusive rights to engage in specific activities.
Due to their consequential natures, reviewing an overview of each clause is an effort worth your time.
What is a use clause?
A use clause limits the tenant’s conduct by outlining exactly how they’re permitted to use the space that they want to lease. A use clause be either prescriptive, defining what the tenant must do, or they can be restrictive, defining what the tenant is prohibited from doing.
While tenants may not like them, a use clause is sometimes necessary to avoid violating zoning laws or other legal issues tied to the property, or it could be necessary to prevent a tenant from running afoul of another tenant’s exclusive use rights. For example, a use clause might state that the premises can only be used for retail purposes, or for a specific type of business, such as a medical office. It may also prohibit certain activities, such as manufacturing or hazardous materials storage.
What’s an exclusive use clause?
An exclusive use clause grants a tenant an exclusive right to engage in a specific activity or operate a particular business in the space they lease. This prevents the landlord from putting competing businesses in the same plaza, mall or building. For example, a coffee shop might have an exclusive use clause that prohibits the bookstore next door from adding a coffee bar, since that would put them in direct competition.
Typically, an exclusive use clause is negotiated by tenants who already have a competitive advantage, such as “anchor” stores in a mall or businesses that pull in a lot of foot traffic. The exclusive use clause can help them maintain their edge in the local market.
Negotiating a commercial lease is very different than negotiating a residential lease, simply because almost everything is “up for grabs.” It’s always wisest to get experienced legal guidance to help you understand the terms of a lease before your business commits to them.