Types of Restrictions Contained in Commercial Leases

When you sign a commercial lease, say for a store within a mall, you will find a variety of restrictions within your contract, or you may negotiate for certain restrictions.  While your contract may include various permissions, or allowable uses for your space, it will also detail ways in which you may NOT utilize the space.   

Examples of Restrictions in Commercial Leases

Here are a few examples of restrictions contained in commercial leases, and the reasons why such specific restrictions exist. 

• Restricting competition – in our example of shop in a mall, the landlord of the commercial property may want to make sure that products and services you offer meet a particular price point, or that you only offer particular products and services, so that competition within the overall commercial property is balanced.  Many times if there is too much competition for a particularly product, a landlord will have difficulty filling vacancies, so they will limit what you sell in your store as a result.  Consider those renting space in a mall’s food court.  The landlord will restrict the types of foods offered by your restaurant, making sure that you do not offering pizza and other Italian items for example, since the landlord already has an Italian food vendor in the food court.

• Restricting the environment – a landlord may restrict the style or demeanor in which you offer or promote your goods or services.  In our mall example, your lease may not allow you to create a certain “obnoxious” environment, or offer services that might adversely affect the rest of the tenants or patrons of the mall.  For example, you may be restricted from offering alcohol, drugs, gambling products, macabre materials, adult materials, etc.  Part of this consideration would also be parking.  If your goods/services are likely to cause a parking problem at the facility, such usage might be prohibited in your commercial contract.  For example, you may not be permitted to have bowling lanes in your store, because the people coming to bowl may introduce a parking challenge for the property.
  

• Restrictions that already exist – in some cases, a landlord will have to keep restricted uses in place that existed with the property’s previous owners and/or tenants.  Failure to do so could open up legal problems for the landlord.  
  

• Exclusive restrictions – you may negotiate to have exclusive use of the space, protecting yourself against competition from other vendors in the commercial space.

Getting Help

Before you sign a lease to rent commercial property or an agreement to buy, it is important that you have a qualified and experienced attorney review your lease. Your attorney can identify any problematic restrictions that may adversely impact your ability to use the property as desired, saving you both time and money associated with changing a lease or altering your business model.