How to Negotiate Exclusive Use Provisions in a Commercial Lease Agreement
If your business leases space in a shopping center or a mall, an exclusive-use provision in your lease would bar the landlord from leasing space to similar businesses. That way, you have the only nail salon, kitchenware or bookstore in the mall, free of competition for mall shoppers. Landlords, of course, want as much freedom to pick their tenants as possible, so it may take some negotiating effort before they'll give you what you want.
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Instructions
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Negotiating Exclusive Use
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Define exactly what businesses you want excluded, real-estate attorney Brian Baker says on his blog. If you run a pizza restaurant, it makes sense to exclude other pizza makers, but if you demand the landlord exclude all restaurants, he'll probably refuse. Even if he agrees, the lack of a good food court will make the mall less attractive, which will hurt your own business.
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Focus on other stores' "primary business." If you run a bookstore, an exclusive-use provision that bans Williams-Sonoma stores---they sell cookbooks---may hurt your business because the store could have drawn added customers to the mall to browse. Retail Traffic Magazine says standard exemptions to exclusive use are based on the square footage other stores devote to books or kitchenware, or the percentage of sales those items make up.
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Make concessions. Landlords routinely require that their current tenants be exempt from the exclusive-use requirement, for instance. It's also common for them to insist that the exclusive-use provision is void if you don't pay your rent, or you stop selling the items covered by the provision.
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Set penalties for nonperformance. Baker recommends you ask for a rent abatement or reduction if the landlord violates the exclusive-use provision; simply securing the right to terminate your lease enables the shopping center owner to bring in a bigger, better competitor and send you packing.
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References
Resources
- Photo Credit shoppers at shopping center image by Sergey Kolesnikov from Fotolia.com
