Some of the language included in a commercial lease can be confusing, especially for those who have never signed a rental agreement for business space previously. There are many more clauses in a commercial lease than there usually are in residential leases.
Some of the terms may seem repetitive or even contradictory to those unfamiliar with the legal terminology used in leases. It is somewhat common for a commercial lease to include an exclusive use clause and a use clause.
What distinguishes these two common lease inclusions?
Exclusive use protects a tenant’s business from competition
An exclusive use clause serves to prevent direct competition from someone renting property in the same facility or a nearby property owned by the same landlord. Exclusive use clauses prohibit the landlord from renting two retail establishments in the same mall to shoe stores that carry the same brands or two restaurants that both offer pizza as their main menu item.
Use clauses are different. They specifically address what the tenant can use the property for. Frequently, landlords restrict tenants to a specific, previously declared business function within the lease. This may limit the ability of a tenant to pivot when a business model is unsuccessful or the market shifts.
Both tenants and landlords may need to negotiate the terms of use and exclusive use clauses to limit the risk associated with a commercial tenancy or seek their enforcement after a lease violation. Working with a real estate attorney when reviewing a lease or seeking to enforce a clause can help to protect those subject to these often lengthy executory contracts.
