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Why do commercial landlords need use clauses in lease agreements?

On Behalf of | Jan 10, 2024 | Business Law

Use provisions in a commercial lease can define and limit the business activities that tenants can conduct on the leased premises.

Well-drafted use clauses in a commercial lease can offer landlords many benefits, including peace of mind about their property. Here are a few other potential advantages to consider.

Maintaining harmony and order

A yoga studio operating next to a speaker system retailer is a recipe for chaos. Use clauses can promote compatibility and help neighbors avoid disrupting one another. Tailoring use provisions to your property type and local community can lead to a harmonious mix of businesses that attract clientele.

Protecting tenants and property

Certain business activities (like those involving hazardous materials) may pose safety threats to tenants or customers and liability risks to landlords. Restrictive use clauses that ban potentially dangerous activities can ensure you and your tenants feel safe and secure.

Preventing conflict and disputes

Ambiguity has no place in a lease agreement. All clauses, especially any that address usage, work best when they clearly outline what is allowed and what is not. When you and all your tenants are on the same page, it can minimize misunderstandings and potential legal battles down the line.

Attracting more tenants

Many commercial landlords mistakenly believe that use clauses deter successful businesses from seeking tenancy. Instead, they often attract well-established and successful brands. For example, many tenants appreciate terms that prevent or restrict direct competition on the premises.

A word of caution

One thing to remember is that overly restrictive usage conditions can indeed alienate possible tenants. Consider getting a legal opinion before you make changes to your lease agreement. That way, you can get an unbiased perspective to help you accurately assess the risks and rewards of the changes you propose.