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Why exclusivity matters in a commercial property lease

On Behalf of | May 16, 2023 | Real Estate |

Renting a commercial property is never as simple as signing a lease for the first vacant property you find. There are many factors to consider, such as location, profitability and the landlord’s willingness to offer exclusivity.

Exclusivity in the context of a commercial lease refers to a landlord’s agreement to not rent out property within the same shopping center or neighborhood to another business that could be a competitor to your own. While it may be obvious that this degree of exclusivity is a benefit, it is important to know the full extent of why exclusivity matters so much in a commercial property lease.

How do commercial tenants benefit from exclusivity in the lease?

Running a business often entails planning for the future by budgeting expenses and forecasting future revenue. Such projections should even affect your decision of whether or not a commercial property is a worthwhile investment. If your lease contains an exclusivity clause, you can be more confident that your actual revenue will closely match your projections. Without the protection of exclusivity, though, a competitor might move in next door and severely cut into your sales.

What can commercial tenants do if the landlord violates exclusivity?

Commercial tenants who experience a dispute with their landlord over exclusivity or any other matter pertaining to a violation of their lease agreement can seek an inexpensive and expedient resolution by filing a claim with the Utah Small Claims Court. It may be possible to claim compensation from the at-fault landlord, but it may also be necessary to explore your options for breaking the lease and pursuing a more profitable property elsewhere.

Negotiating for exclusivity in your initial lease agreement can benefit your business and safeguard your investment. When a landlord violates an exclusivity clause, however, drastic legal action may be necessary.