Exclusive use clauses & their role in New Jersey commercial real estate
Exclusive 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.
How to avoid potential litigation
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:
The length and transferability of the exclusivity. For instance, what happens if the lease is assigned to an entity in another line of business? What happens if the business goes dark for a certain period of time?
The definition of competing use. Broad or vague exclusive use clauses are particularly hard to administer and can lead to litigation. For instance, what is the difference between a bakery that sells coffee and a coffee shop that sells baked goods?
The clause should also include a clearly-defined remedy should the landlord violate the tenant’s exclusive use. Common remedies include rent abatement for the duration of the competing use, and the right to terminate the lease if the competing use is not abated within a certain time period.
Each exclusive clause may also provide for some leeway as to other tenants. For instance the child clothing exclusive may allow another clothing store to display not more than “50 square feet of display area for child clothing” for sale related to its prime purpose.
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.
Top 5 Causes Leading to Construction Defect Litigation
The five most common causes of construction defect litigation are design defects, substandard materials, workmanship defects, code violations, and subsurface defects. Because these flaws can compromise a building’s integrity, functionality, or safety, they frequently lead to disputes involving multiple parties and high financial stakes. Key takeaways: What is Construction Defect Litigation? Construction litigation is complex, […]
How to Protect Your New Jersey Business When Going through a Divorce
The most effective ways to protect your business in a divorce are put in place before one begins: a prenuptial or postnuptial agreement, clean separation of business and personal finances, and divorce contingencies built into your operating or buy-sell agreements. If divorce is already underway, the priorities shift to establishing how the business is classified […]
The most common franchise disputes involve breach of contract, franchise termination and non-renewal, intellectual property rights, territorial encroachment, royalty and fee payments, franchisor support obligations, and violations of state franchise laws such as the New Jersey Franchise Practices Act. Franchisors and franchisees can often resolve these conflicts by providing written notice detailing the dispute and […]
Reputational Risk and Legal Exposure: Why New Jersey Businesses Must Manage Them Together
New Jersey businesses must manage legal and reputational risk together because modern disputes play out on two fronts at once: the legal proceeding itself and the court of public opinion, where customers, employees, investors, and business partners often reach conclusions long before a judge or jury has had the opportunity to evaluate the facts. Success […]
Eviction Is Not Always the End: Understanding Post-Possession Rent Claims in New Jersey and New York
No. An eviction does not automatically end a tenant’s obligation to pay rent. Post-eviction rent claims are common because recovering possession resolves who has the right to occupy the premises, but it does not extinguish the tenant’s contractual obligations under the lease. Whether unpaid or future rent remains owed depends on three factors: the lease’s […]
Company Dissolved? Legal and Financial Consequences to Expect
A company is dissolved; legally, it ceases to exist. Accordingly, dissolution results in significant legal and financial consequences. It is a process that must be properly managed to avoid continuing liability. The Corporate Dissolution Process Corporate dissolution is the legal process of formally closing a corporation, paying its debts and distributing the remaining assets. Most […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
