Most commercial leases for multi-tenant properties contain clauses which regulate the tenants’ use of the leased premises. Many tenants will require a landlord to grant the tenant the exclusive right to operate a certain business or sell a certain product to avoid competing with other tenants. These provisions are appropriately referred to as exclusive use clauses. For the landlord to satisfy its obligations under an exclusive use clause of one lease, the landlord is required to incorporate provisions in its other leases prohibiting the other tenants from using the leased premises for the restricted purpose. These clauses are commonly referred to as prohibited use clauses.
A landlord may also include a prohibited use clause to prevent a tenant from using the leased premises in a manner which the landlord believes is a nuisance to the other tenants and reducing the overall value of the property. For example, a landlord may consider a bowling alley or a night club as a nuisance.
A tenant being able to negotiate an exclusive use provision in the lease can have a significant impact on the financial success of the business. However, landlords will be hesitant to grant an exclusive use if it will limit the landlord’s ability to rent the other locations on the property. If a landlord does grant an exclusive use, the landlord must be prepared to incorporate corresponding prohibited use clauses in the leases of all of the other tenants.