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What’s an exclusive use clause in commercial real estate?

On Behalf of | Feb 20, 2024 | Contracts |

When you sign a rental agreement on a commercial property, you want to make sure that you get what you’re paying for – and that means paying close attention to your contract and any use clauses.

A “use” clause in a commercial real estate contract basically sets the parameters for how the property can be used by the tenant, along with any restrictions. An exclusive use clause, in comparison, gives the tenant some power by granting them specific usage rights that no other tenant is permitted.

What’s the benefit of an exclusive use clause?

Essentially, an exclusive use clause gives the tenant a certain amount of protection for their business by specifically prohibiting any competitors from cutting into their business by operating in the same building or plaza.

For example, an orthopedist renting an office in a building might want an exclusive use clause that prevents the landlord from allowing any other orthopedists or sports medicine doctors to open up their offices in the same building. 

In many cases, landlords are reluctant to give tenants an exclusive use contract because they don’t want to limit their own possible sources of income. Tenants are most likely to successfully negotiate exclusive use provisions when they have some financial “clout,” either because they are part of a successful franchise, already have a sizable customer base or intend to rent a large section of the property. 

If you’re a tenant who hopes to obtain an exclusive use contract in your lease, expect a lot of discussion about the exact wording of the agreement. Legal guidance can help you make certain that you fully understand the terms of your contract.