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How to Keep out Competitors if You Lease Retail Space

February 18, 2015

 

Most stores that lease space in a mall or other commercial area would like a guarantee that the landlord won’t also rent to a competing business.

 

This guarantee is known as “exclusive use,” and you can negotiate for it in a lease. If you’re negotiating a right to exclusive use, here are some things to consider:

 

What’s the use? You’ll want to specifically define your “use,” and what kinds of other businesses are allowed. For instance, if you have an ice-cream-cone shop and you also sell a few ice-cream cakes, can the landlord still rent to a bakery? If a coffee retailer has “exclusive use,” does that mean a sandwich shop can’t also sell coffee?

 

What about pre-existing tenants? A landlord can promise not to rent to a competing business in the future, but what happens if an existing tenant wants to change its business model and start offering competing products? 

 

What if things change? What happens if you re-focus your business and your use changes? Can you still keep out competitors? What if you sublet some space or assign the lease – does the exclusive use still apply? If you temporarily fall behind on the rent, do you lose your right to exclusive use?

 

What’s the remedy? If the landlord violates the contract and leases space to a competitor, what can you do? Presumably you can sue in court to make the landlord stop, but can you also withhold rent, or terminate the lease? If so, do you first have to prove that you actually suffered financial harm?

 

Image courtesy of Stuart Miles at Freedigitalphotos.net

 

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