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How does a use clause work in a commercial lease?

On Behalf of | Feb 3, 2020 | Real Estate

As a property owner, leasing your building can be an excellent source of income. However, if you are going to rent your property, it’s important to have a rock-solid lease in place. Otherwise, the money might not be worth the headache—or the potential legal ramifications.

One aspect of a lease that every landlord should consider carefully is the use clause, which determines what the leasing party can do on your property in a commercial capacity.

What does a use clause entail?

A use clause can stipulate anything from what kind of businesses can operate in the space to acceptable hours of operation to what signage they can put up. It may also include more detailed instructions, for example, if they can use heavy equipment in the space. A dispute might arise if they start their business in one direction and shift, violating the terms of their lease by operating outside of the scope.

Use clauses might also speak to the competition in the surrounding neighborhood. If an existing business has exclusive rights to a certain retail space, your leaser can’t interfere with that.

How does the use clause affect property owners?

It is the property owner’s responsibility to have a lease drafted that protects them as well as their commercial real estate. If disputes arise, this lease will be the basis for any legal action or defense you can mount. Your lawyer can help you be specific with your use clause—and all aspects of your lease—to proactively circumvent potential problems.