Exclusive Use Clauses: Why Overlooking Them Can Destroy a Retail Business

Retail leases can make or break a business. One of the most overlooked but critical terms is the exclusive use clause. This provision prevents the landlord from leasing other space in the shopping center or building to a competitor. Without it, your business may find itself competing with the store right next door.

What Is an Exclusive Use Clause?

An exclusive use clause restricts the landlord from allowing other tenants to sell the same or similar goods or services as you. For example, a coffee shop tenant might negotiate a clause prohibiting the landlord from renting to another coffee seller within the center.

Why It Matters

• Protects Your Investment: You pay premium rent for visibility. Without exclusivity, a competitor can siphon away your customer base.
• Stabilizes Revenue: Reduces the risk of sudden competition undermining your sales projections.
• Increases Leverage: An enforceable exclusivity clause strengthens your position in lease negotiations and disputes.

Risks of Overlooking the Clause

Imagine signing a long-term lease for a boutique fitness studio, only to see another studio open two doors down. Suddenly, your rent obligations remain the same, but your revenue drops. Without exclusivity, your landlord has no obligation to protect you from competition.

Negotiating Exclusive Use Clauses

• Be Specific: Define the exact goods or services covered. Vague terms create loopholes.
• Secure Remedies: Insist on meaningful remedies if the landlord breaches exclusivity, such as reduced rent or termination rights.
• Consider Carve-Outs: Landlords may want exceptions for existing tenants or anchor tenants. Make sure these don’t swallow the protection.

Bottom Line

An exclusive use clause isn’t just legal fine print—it’s a survival tool for retail businesses. At JDE Law Firm, PLLC, I help tenants and landlords negotiate these clauses to protect revenue, reduce disputes, and safeguard investments.

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