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Use and Exclusive Clauses in Commercial Lease Contracts

Burgoyne Law Offices Feb. 1, 2021

In some South American countries, when someone sees your business doing well, they will set up a rival company as close as possible. As a shopper, it makes things easy. If you want a new car part you go to Street X. If you need a dentist, you go to Street Y. On each street, you will find tons of businesses offering similar products to each other.

As a U.S. business owner, things do not usually work that way. It is less “The more, the merrier” and more “This town’s not big enough for the two of us.” You might be annoyed if someone sets up in competition with you next door. Equally, if you set up your convenience store next door to another convenience store, they might worry you will take their customers.

What Is an Exclusive Clause?

Tenants insert exclusive clauses. You can insert one to stop the landlord from renting space to someone competing with you. Be aware that the landlord may expect you to pay more in return for exclusivity.

What Is a Use Clause?

Landlords insert use clauses. Another of the landlord’s tenants may have inserted an exclusive clause in their contract. It may stop you from doing what you want with the space you rent. The landlord should then insert a use clause in your agreement to clarify what you can and cannot use the premises for. A landlord might also insert a use clause to spell out rules such as what color your sign can be or what time you have to close.

A well-written commercial lease is essential. You need to build your business on a strong foundation. Otherwise, you could be paying a large sum of money for premises that do not give you the benefits you assumed they would.