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Author: Scarinci Hollenbeck, LLC
Date: August 23, 2016
The Firm
201-896-4100 info@sh-law.comExclusive use clauses are frequently found in New Jersey commercial leases, particularly standard contracts for retail space. Therefore, it is imperative for commercial tenants and landlords to understand the potential legal implications.
In basic terms, an exclusive use provision in a commercial real estate lease grants a tenant the right to operate a particular use exclusively within a defined building or shopping center. For instance, a children’s clothing store may negotiate a lease provision that prohibits the landlord from renting space to another business selling children’s clothing. Depending on the terms of the provision, it would likely not prevent the landlord from leasing space to a children’s toy store or an adult clothing store.
Exclusive use clauses are a benefit to the tenant because they limit competition in the same retail space.
Meanwhile, in a tenant’s market, a commercial landlord may want to offer exclusive use to secure an attractive tenant. Exclusive-use provisions can also benefit landlords where rent is based on the tenant’s profits because less competition often leads to greater sales.
To avoid potential litigation down the road, tenants and landlords should avoid using standard contract language. Instead, they should tailor the definitions and terms to the particular circumstances of the lease. Here are a few things that should be considered:
Of course, these are just a few issues that should be negotiated between the parties. If you find yourself thinking of entering into a commercial lease, it is wise to consult an experienced NJ commercial real estate law attorney.
Otherwise, if you’re still unsure about exclusive use clauses and their role in a commercial lease or if you would like to discuss the matter further, please contact me, Victor Kinon.
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