An exclusive use contract is a clause that’s generally used in commercial leases. What does “exclusive use” mean? It refers to the clause that the tenant can only use the leased property for a specific purpose.
One of the most common examples of an exclusive use agreement is shopping complex lease agreements, where the tenant is only allowed to use the space for one pre-defined activity. It could be a clothing store, a cosmetic store, or a restaurant.
The exclusive use agreement also restricts other tenants from using their spaces for the same purpose.
The Effects of an “Exclusive Use” Contract
Let’s continue the previous example of a shopping complex. In this case, the exclusive use contract will affect several other tenants in the complex as well. Once the agreement is signed, the landlord will need to be extra careful not to breach the contract by allowing a similar business to lease a spot.
It’s pivotal that landlords who manage large shopping complexes have a list of all signed exclusive use contracts so they can avoid any possible conflict of interest later.
In addition, landlords must also ensure they are capable of handling a situation where anyone is found breaking a previous exclusive use agreement. This is why all lease agreements should clearly state the penalties for engaging in any activity that violates the previously-agreed exclusivity clause.
How “Exclusive Use” Contracts Work
Before signing on the dotted line, both the landlord and the tenant should make sure that the contract provisions are clear and precise. If the “exclusive use” clause is written vaguely, it can lead to a number of conflicts in the future.
Both the parties must be in agreement as to what “exclusivity” really is, i.e., the end result must be mutually satisfying. The landlord should not be restricted in the new tenants they are allowed to accept, and the tenant should be protected against any direct competition within the property.
Let’s say you own a building and one of your tenants is a dermatologist who insisted on signing an “exclusive use” contract before leasing your space. Now, most people will assume that the only direct competition of a dermatologist will be another dermatologist, right?
Well, it depends. The clause could be very narrow and could specify that any other professional who offers cosmetic services must not be allowed to get a lease in the same building. It could be a plastic surgeon, cosmetic surgeon, or even a cosmetic dentist.
That’s why hiring an experienced and knowledgeable real estate lawyer in Florida is important. Having a reliable professional by your side will ensure that, as a property owner, you don’t harm your tenants’ business but also don’t miss out on potential tenants.
Why do You Need an “Exclusive Use” Contract?
The health of a business depends on many factors, one of the most important ones being that a business owner stays ahead of the competition. An exclusive use contract greatly reduces the probability of any direct competition for the tenant business owner.
So how does it benefit you – the landlord?
Since some tenants pay part of their rent based on their gross sales, and exclusivity increases the odds of the business’s success, the landlord obviously benefits from the clause.
But, again, the exclusive use agreement must be well-written to benefit both the landlord and the tenant. You should hire a skilled real estate lawyer in Florida who understands the industry well and knows how to write a mutually beneficial contract, an attorney like Patrick Cordero at The Law Offices of Patrick L. Cordero, PA.
Contact us at 305-445-4855 to know more about exclusive use contracts and how they can increase your ROI! If you are having problems with bankruptcy, then you need someone who cares. Call Patrick Cordero’s office today for an appointment.