Exclusive Use Clauses in Retail Leases
An exclusive use clause stops the landlord from leasing other space in the center to a competitor. For restaurants and specialty retail, it can be the most valuable clause in the lease.
Write it narrow enough to get, broad enough to matter
"No other restaurant" will not get approved. "No other tenant whose primary use is the sale of pizza" usually will. Define the product, and use a measure like "primary use" or "more than 15% of sales" so the landlord can still lease to a grocery store that sells frozen pizza.
Common carve-outs landlords ask for
- Existing tenants and their renewals or assignments
- Anchors and spaces above a certain size
- Incidental sales below a set percent
- Outparcels or pads the landlord does not control
Remedies
If the landlord breaks the exclusive, the tenant usually gets reduced rent, often 50% or a percent of sales, until the violation stops. Ask for a termination right if it goes on for a set period, such as 12 months.
Make it survive
Tenants should ask that the exclusive survive assignment to a buyer or franchisee, and that it is lost only if the tenant stops its exclusive use for a set time. Landlords will ask that it ends if the tenant goes dark.
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Other guides
This guide is general information, not legal advice. Deal terms vary by market and by deal.