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Lease agreements define the rights and obligations of both the lessee (the tenant) and the lessor (the landlord) of a piece of commercial property. One critical component of these agreements is the use clause, which dictates how the tenant may use the leased property. Ensuring compliance with use clauses is crucial as it helps to prevent legal disputes.
What Are Use Clauses?
A use clause in a commercial lease agreement outlines the activities a tenant may conduct on the property and often includes restrictions to protect the interests of both the landlord and the other tenants. Use clauses vary significantly depending on the type of property, the nature of the business, and the landlord’s preferences.
The Importance of Use Clauses
Use clauses are important because they:
- Protect Property Value — Use clauses help maintain the property’s value by ensuring that it is used in a manner consistent with its intended purpose. For example, a landlord of a retail shopping center may restrict the types of businesses allowed to operate in the shopping center to maintain a certain ambiance or attract a particular customer base. This helps preserve the property’s marketability and overall appeal.
- Prevent Conflicts Among Tenants — In multi-tenant properties, such as shopping centers or office buildings, use clauses prevent conflicts between tenants by clearly defining what each tenant can and cannot do. This helps avoid situations where competing businesses are located next to each other or where one tenant’s operations might disrupt another’s.
- Ensure Compliance with Relevant Laws — Use clauses ensure that the tenant’s activities comply with zoning laws, building codes, and other legal requirements. This protects both the landlord and the tenant from potential legal issues. For example, if a property is zoned for retail use, the landlord may prohibit industrial activities in the use clause.
- Help Manage Risk — By clearly outlining permissible activities, use clauses to help manage risks. Provisions can require tenants to obtain specific insurance coverage or to adhere to safety regulations. This proactive approach reduces the likelihood of accidents, damages, or legal disputes.
Ensuring Compliance with Use Clauses
Here are some ways a landlord can ensure their tenant’s compliance with their use clauses:
- Use Clear and Specific Language — Use clauses must be drafted with clear and specific language. Ambiguities lead to misunderstandings and disputes.
- Communicate Regularly — Regular check-ins and discussions about the tenant’s activities can identify and address potential issues early. Landlords should also keep tenants informed about any changes to property rules or legal requirements that may impact the use clause.
- Regularly Inspect the Property — Provided doing so is allowed in the terms of the contract, landlords should conduct routine inspections of the leased premises to ensure that the tenant’s activities align with the use clause. These inspections provide an opportunity to observe any deviations from the agreed-upon use and address them promptly.
- Consider Lease Amendments — Over time, a tenant’s business needs may evolve, necessitating changes to the use clause. Rather than allowing tenants to deviate from the original agreement, landlords should formally amend the lease to reflect any new uses. This ensures that both parties agree to the changes and maintain a clear, enforceable contract.
- Take Legal Recourse — If a tenant violates the use clause, landlords have several legal remedies available. These may include requiring the tenant to cease the prohibited activity, terminating the lease, or even seeking damages for any harm caused.
Contact an Experienced Commercial Real Estate Lawyer Today
The experienced attorneys of LaFountain & Wollman P.C. are here to assist with all aspects of commercial lease agreements, including drafting, reviewing, and enforcing use clauses. We can also assist commercial tenants with lease questions. Contact us today.