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Exclusivity and Restrictive Use Clauses a Commercial Lease

If you operate a brick and mortar business, the physical space in which you operate is likely one of the most important aspects of your business. There is much more to a commercial lease agreement than deciding on the length of the lease and the rent – landlords often include exclusivity and restrictive use clauses in their commercial leases in order to limit what tenants may and may not do, while also establishing preferential treatment for their largest tenants. Below is some information about both of these kinds of clauses and what to look for in a commercial lease. For more information, call our office today.

Exclusivity Clauses

An exclusivity clause is a clause in a commercial lease that grants a tenant the exclusive right to engage in a certain type of activity at that location. These clauses can grant an exclusive right to carry on a certain type of business, carry a certain product, or establish other rights related to the way a commercial space is used.  Generally speaking, exclusivity clauses are granted to large and lucrative tenants, often referred to as “anchor” tenants. For examples, think of a shopping center built around a large supermarket or a mall that has one large department store.

Restrictive Use Clauses

Restrictive use clauses are often used with respect to other tenants when one tenant has an exclusivity clause but can also be used alone. If they are used as an extension of an exclusivity clause, they generally restrict tenants from engaging in conduct that would violate the exclusivity granted to the other tenant. They can, however, simply restrict tenants from engaging in certain business activity that the landlord may prohibit, such as selling edible goods or subletting unused space to another tenant.

Importantly, restrictive clauses can be imposed upon landlords as well. Say, for example, you are operating a childcare facility that would like to rent space in a particular building – it is unlikely that you would want an adult bookstore next door. You may be able to negotiate a clause that restricts your landlord from renting to adult-themed businesses.

Contact a New Jersey Real Estate Law Firm Today for More Information

If you are considering entering into a commercial lease, you should have an experienced attorney review the terms of your agreement before signing any documents. To schedule a consultation with one of our attorneys, please call Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C. today at 732-422-100 or send us an email through our online contact form.