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What are exclusive and use clauses in commercial real estate?

On Behalf of | Sep 29, 2022 | Commercial Real Estate

When you sign a lease on a commercial building, you may encounter use and exclusive clauses that establish additional rules. These clauses often limit the activities you and the other tenants on the property can do.

As a business owner, you should take care when signing a lease and ensure the terms benefit your company.

Restrictions on activity

Use clauses describe which business activities the landlord allows or prohibits. This can include the products you sell and the services you provide.

Use clauses often limit business owners. However, sometimes use clauses can help you maintain a good image by restricting activities that do not align with your brand. For example, if you own a health food store, you could rent a space on a property that prohibits fast food.

Exclusive clauses

Commercial landlords sometimes employ exclusive clauses to attract and secure valuable tenants. If you have an exclusive clause in your lease, your landlord can limit the activities of the other tenants on the property to reduce competition. Furthermore, you can use an exclusive clause to prevent your direct competitors from renting in the same area as you.

If you choose to sign a lease with an exclusive clause, the document should describe how your landlord intends to enforce the restrictions. You can also include remedies and damages in case a competitor goes against your agreement.

Use and exclusive clauses can both protect and restrict your business. It is important to understand what you are agreeing to when you sign a commercial lease.