Owning a business can be tremendously rewarding -- and stressful. No matter how good your products or services are, there are a lot of different factors that can affect the health of your business in negative ways. You constantly have to look ahead and anticipate problems so that you can try to prevent them.
That's where exclusive use clauses in commercial leases come in. They're specifically designed in anticipation of potential problems that you may have not with your landlord -- but other tenants.
What's an exclusive use clause?
An exclusive use clause limits your competition. They're mostly used when a commercial tenant leases space in a shopping center, plaza, strip mall or large commercial business.
In effect, they stop your landlord from renting another space to one of your direct competitors. If written well, they also impose a duty on your landlord to stop any existing tenants from adding services or products that could detract from what you have to offer.
How does an exclusive use clause work?
Imagine that you operate a store that caters to people who knit and crochet. You carry books, patterns, needles, yarn and other related items. An exclusive use clause in your contract might prevent your landlord from allowing other tenants to offer the same niche products.
That could be an important protection if, for example, a craft store opens up in the same plaza. Without your exclusive use clause, the much-larger craft store could freely offer customers cheaper yarn and needles in addition to its other craft items. That would likely cost you a significant part of your business.
Whether you're negotiating a new commercial lease or going through your old one in advance of a renewal, stop to consider how you can limit your competition a little. An exclusive use clause may be just what you need.