What is a Lease Use Clause? - New York & New Jersey Business Transactions | Internicola Law Firm

What is a Lease Use Clause?

The “use clause” contained in a business lease is a critical section that identifies what type of business – including the products that you may sell and the services that you may offer – that you may operate from the leased premises. Use clauses must be evaluated both “offensively” and “defensively” such that:

Must Expressly Permit Your Business Operations

From an “offensive” standpoint your lease use clause must expressly permit the operation of your business and should include detail about the types of services that your business will provide and the types of products that you may sell. Generic characterizations such as “restaurant”, “day spa”, “gym”, etc…are generally not enough.

Must Restrict the Landlords Actions

From a “defensive” standpoint, if possible the lease use clause should restrict the landlord from leasing common and related space (i.e., if your leased premises is part of a shopping center or strip mall) to potential competitors. So, for example if you decide to establish a “day spa” in a strip shopping center with 15 other stores around you, you will want to expressly prohibit your landlord from leasing other space (in the shopping center) to another day spa.

For franchised and non-franchised businesses alike, your lease agreement will constitute one of your most critical business assets. It is critical that you get your lease right and this starts off with your use clause.

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