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Can you get an exclusive use clause for your business?

On Behalf of | Sep 27, 2022 | Risk Management

You may have found the perfect location for your business – but now you have to hash out the details of your lease with the potential landlord.

Unlike residential leases, almost everything in a commercial lease is up for negotiation. That includes certain “use” clauses that can protect your business far into the future – if you can get one.

What’s an exclusive use clause?

An exclusive use clause is always to the advantage of the tenant, not the landlord because it restricts what other tenants are permitted to do. In essence, an exclusive use clause grants you the sole right to do a particular activity in the plaza, strip mall or commercial building – over all other tenants (including future ones).

For example, imagine that you run a coffee shop. In order to protect your business, you want an exclusive use clause from the landlord that will prevent any other business from acting as your competition. If the bookstore at the other end of the plaza decides to install a coffee bar to encourage their customers to sit around and browse or socialize a little, you could ask your landlord to enforce your clause and make them stop.

Naturally, landlords aren’t particularly fond of granting exclusive use clauses. They’d much rather have the freedom to rent to whomever they choose, and putting restrictive covenants on their other tenants can make their commercial spaces less attractive.

So, how can you get an exclusive use clause out of your landlord? Generally, the more valuable you are as a tenant, the more likely the odds your landlord will capitulate. If you are looking to rent their “cornerstone” property, and have a well-established business and a solid customer base that is likely to bring significant foot traffic to the entire premises, you have more bargaining power than a new, untested business that’s very tiny.

Negotiating for the lease terms that you want and need isn’t always easy to do on your own. Because of the complexity, it’s wise to have some legal guidance before you sign on the dotted line.