Exclusive use clauses are relatively common during commercial lease negotiations. Exclusive use clauses: A classic real estate newbie mistake - Clausehound 275 (1981) (showing that law was to the same effect prior to 1999 codification). While this is not uncommon (any suit for both an injunction and damages, for instance, involves both jury and non-jury issues), the landlord-tenant context presents a unique problem. The tenant may also argue that, under Maryland law, leases should be construed against the landlord and in favor of tenants. regardless of the amount involved." All Rights Reserved. See, e.g., General Motors Acceptance Corp. v. Daniels, 303 Md. The Proposed 2024 SMFP Has Arrived - Petitions to Adjust Need Can Kids Consent to Calls? Most commercial leases for multi-tenant properties contain clauses which regulate the tenants' use of the leased premises. Challenges in Drafting a Restaurant Exclusive Use Clause Tenant's Exclusive Use Rights Sample Clauses | Law Insider Tenant's Non-Exclusive Use Sample Clauses | Law Insider Maryland law is clear that the new tenant may be enjoined from competing with the old tenant if, at the time that the new tenant entered into its lease, it was aware of the right granted to the original tenant. Hershey, 154 Md. is excited to announce the addition of Kelly Sullivan to its team of experienced attorneys. | The lease provided that, upon a breach of the covenant, the rent otherwise due would be immediately reduced by one-half until the violation ceased. "Exclusive Use" Contracts: What are They and Why Do You Need Them? Absent an express remedy applicable to a breach of a use exclusive, landlord's counsel should review the lease to determine what general remedies are available to the tenant upon a landlord's breach. As Maryland cases reveal, however, even seemingly well-drafted leases--using what appear to be unambiguous common terms or fully-understood trade terms to define the restriction--can be the subject of disputes leading to litigation. Upon such expiration or termination, Tenant shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, and such items of furniture, equipment, business and trade fixtures, free-standing cabinet work, movable partitions and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and such similar articles of any other persons claiming under Tenant, as Landlord may, in its sole discretion, require to be removed, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from such removal. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. If Tenant fails to properly maintain and/or repair the Premises as herein provided following Landlords notice and the expiration of the applicable cure period (or earlier if Landlord determines that such work must be performed prior to such time in order to avoid damage to the Premises or Building or other detriment), then Landlord may elect, but shall have no obligation, to perform any repair or maintenance required hereunder on behalf of Tenant and at Tenants expense, and Tenant shall reimburse Landlord upon demand for all costs incurred upon submission of an invoice. A landlord and tenant could reach a compromise when it comes to the scenario above by agreeing to place a capped amount on the sales that another tenant may derive from the ancillary uses of the negotiating tenant (i.e., the sale of hot beverages). In a typical shopping center lease, the tenant has committed to invest considerable sums to open its store, and expects . Landlords will be reluctant to restrict its other spaces from ancillary uses that do not directly pose a threat to the tenants primary business. Most comprehensive library of legal defined terms on your mobile device, All contents of the lawinsider.com excluding publicly sourced documents are Copyright 2013-. Commercial Leases: Exclusive and Prohibited Use ClausesMay 23, 2007. where both parties are represented by counsel.". 398 (1970) (enforcing a covenant against leasing to a competing five and ten cent store within five miles of the original store); Ruben v. Leosatis, 165 Md. If, for instance, the new tenant is selling a product as to which the existing tenant claims an exclusive, then the landlord can persuade the new tenant to stop selling the product. If drafted thoughtfully it will accurately outline all activities the tenant envisions using the premises for. Tenant shall be given six (6) reserved parking spaces in a mutually-acceptable location without charge. Additionally, neither Landlord nor its affiliates ( including Model Group and/or any subsidiaries) shall develop, lease or operate any space within five (5) miles of . Landlord Repairs (a) Except as otherwise provided in this Lease, Landlord agrees to keep in good order, condition and repair in compliance with all applicable laws, codes, and ordinances from time to time in effect (including but not limited to Environmental Laws) and all directions, rules and regulations of governmental agencies having jurisdiction, and the standards recommended by the Chicago Board of Fire underwriters applicable to the Building, the roof, public areas, exterior walls (including exterior glass) and structure of the Building (including all plumbing, mechanical and electrical systems installed by Landlord, but specifically excluding any supplemental heating, ventilation or air conditioning equipment or systems installed at Tenants request or as a result of Tenants requirements in excess of Building standard design criteria), all insofar as they affect the Premises, except that Landlord shall in no event be responsible to Tenant for the repair of glass in the Premises, the doors (or related glass and finish work) leading to the Premises, or any condition in the Premises or the Building caused by any act or neglect of Tenant, its invitees or contractors. Any request for approval shall be in writing, delivered not less than 15 business days in advance of any proposed construction, and accompanied by plans, specifications, bid proposals, work contracts and such other information concerning the nature and cost of the alterations as may be reasonably requested by Landlord, including the identities and mailing addresses of all persons performing work or supplying materials. Code Ann., Cts. The Strong Firm prevails in dispositive motion regarding Texas economic loss rule resulting in dismissal of claims again party. By inserting exclusive use clauses in the leases, your tenants can increase their profit margins. This Standard Clause has integrated notes with important explanations and drafting and negotiating tips for both landlords and tenants. The landlord or property owner has to weigh their tenants' desires for exclusivity against their own needs to have a broad pool of potential commercial renters to fill their properties. Use of the Leased Property (a) Lessee covenants that it will proceed with all due diligence and will exercise reasonable efforts to obtain and to maintain all Licenses and other approvals needed to use and operate the Leased Property and the Hotel under applicable local, state and federal law. 302 (1928) (enjoining new tenant from selling tobacco in violation of original tenant's use exclusive). If Tenant does not remove Tenants Trade Fixtures from the Leased Premises prior to the end of the term, however ended, Landlord may, at its option, remove the same and deliver the same to any other place of business of Tenant or warehouse the same, and Tenant shall pay the cost of such removal (including the repair of any injury or damage to the Leased Premises resulting from such removal), delivery and warehousing to Landlord on demand, or Landlord may treat such Trade Fixtures as having been conveyed to Landlord with this Lease as a Xxxx of Sale, without further payment or credit by Landlord to Tenant. It refers to the clause that the tenant can only use the leased property for a specific purpose. Why Use an Exclusive Use Clause? | The National Law Review 254, 262-63 (1966); Standard Garments Co., Inc. v. Hoffman, 199 Md. A letter from the landlord or its attorney to the new tenant may be enough; a threat by the existing tenant to include the offending tenant in any litigation may convince the new tenant to stop the competing activity. One Step Forward, Two Steps Back: The Latest on Federal Court You Cant Fire Me For A Facebook Post! If the new tenant's lease expressly prohibits the activity that is being challenged by the old tenant, then the landlord would have a contractual claim against the new tenant, and it would be particularly important that the new tenant be a party to the litigation. This is because landlords want to maintain a complementary tenant mix. Mr. Richardson was admitted to the Kentucky Bar in 2002, after graduating from the University Of Dayton School of Law in 2001. A tenant negotiating its exclusive use clause should take into account several factors, including: Leases that have priority over the tenant's lease and have either: conflicting use clauses; or broad use clauses. Required fields are marked *. TENANT EXCLUSIVE. Mr. Richardson has closed enumerable secondary market and portfolio residential real estate transactions and his commercial practice ranges from You are responsible for reading, understanding and agreeing to the National Law Review's (NLRs) and the National Law Forum LLC's Terms of Use and Privacy Policy before using the National Law Review website. 318, 327-28 (1973). Opening with the premise that a fair, open, and competitive marketplace has long been a cornerstone of the American economy, while excessive market concentration threatens basic economic liberties, democratic accountability, More sophisticated estate planning may be appropriate for people that: have sufficient net worth to consider tax planning; own assets in more than one state or jurisdiction; highly prize privacy; have blended families, and/or have a history of family discord (Complicating Factors). Drafting Exclusive Use Contracts That Work Open Space Acquisitions within the PPA. Knowing what these. 519, 526-27 (1954) (noting that the rule of strict construction in favor of unrestricted use does not mean that the language at issue must be so narrowly construed that its general purpose is defeated); Quinn Homes, Inc. v. Bay City Improvement Ass'n, Inc., 45 Md. During any restoration period beyond the expiration or earlier termination of the Term, Tenant shall pay Rent to Landlord as provided herein as if said space were otherwise occupied by Tenant. Landlord hereby consents to the installation of a computer room in the Demised Premises provided that the Tenant pays the costs set forth in the preceding sentences and complies with the requirements of the remainder of this Section 14. When a dispute regarding the breach of a use exclusive reaches the litigation stage, there a number of procedural issues. We want to provide the best possible experience for our users. at 59. Scope of Exclusives. An exclusive use clause prohibits a landlord from leasing to another tenant for the same business purpose as the existing tenant. January 25, 2016 Landlord shall not lease any space in the Building for operation of a brewery, distillery, tap room, restaurant or other establishment serving alcohol. . 42, 47 (1951). The Court of Appeals has held that the type of "landlord and tenant actions" referred to in the statute are only those claims that historically landlords brought at common law to assert possessory in rem and quasi in rem interests, by which landlords could quickly and inexpensively obtain repossession of leased premises upon a tenant default. For example, a landlord may consider a bowling alley . An exclusive use contract is a clause that's generally used in commercial leases. 190, 198 (1953), the Court of Appeals observed that the rule that ambiguities should be construed against the drafter "perhaps should have but slight force . Any damage or deterioration of the Premises shall not be deemed ordinary wear and tear if the same could have been prevented by good maintenance practices by Tenant. The stakes in litigation can be raised significantly when that right exists. When the landlord leased to a tenant operating a "Terry" shop, the court concluded that "Terry" was the same as "Adeline" and that the first tenant's exclusive had not been breached. The way the tenant's competitors are defined. An . The whole use exclusive issue, then, would arise when the tenant asserts a defense or counterclaim to the summary ejectment claim, based on the alleged breach of the use exclusive, and the tenant's right, in such case, to reduce or avoid paying rent. An exclusive use clause prohibits a landlord from leasing to another tenant for the same business purpose as the . Upon completion of any Alterations, Tenant shall deliver to Landlord: (i) sworn statements setting forth the names of all contractors and subcontractors who did the work and final lien waivers from all such contractors and subcontractors; and (ii) as built plans for any such Alteration. What Happens When Your Disadvantaged Business Enterprise Economic Growth and Disclosure Laws: Financial Insights From the Nevada and Washington State Pass Far-Reaching Consumer Health Data 13 Ways to Use Summer Downtime to Build Your Business and Brand. Exclusive Use Sample Clauses: 489 Samples | Law Insider This informationhas been prepared by Tydings for informational purposes only and does not constitute legal advice. When Seidler sued her landlord for injunctive relief (and damages), the landlord impleaded Freedman, the offending tenant. Exclusive Use Agreement: Everything You Need to Know - UpCounsel The following language from a lease for a home improvement center is typical of language protecting a tenant from competition: As a material part of the consideration inducing Tenant to execute this Lease and make the necessary expenditures to perform its obligations hereunder, Landlord hereby covenants and agrees that, throughout the Term of this Lease if and as long as either the Demised Premises shall be open and principally operating for a principal use as a home improvement center store, or the Demised Premises is vacant, Landlord shall not permit (i) any of the Other Stores or any contiguous or adjacent property that is directly or indirectly, now or in the future, under Landlord's control or in which Landlord has a legal or beneficial interest, to be principally used for, or operated as, a home improvement center store, lumberyard or hardware store. 241, 250 (1967). Any one of those choices would place the litigation outside of the jurisdiction of the district court. Counsel for landlords need to be aware of drafting considerations for use exclusives, strategies for avoiding litigation, and the procedural and substantive aspects of enforcement proceedings. Copyright 2023 MH Sub I, LLC. TENANTS MAINTENANCE AND REPAIR Tenant at its sole expense shall maintain and make all repairs and replacements necessary to keep the Premises in the condition as existed on the Commencement Date (or on any later date that the improvements may have been installed), excepting ordinary wear and tear, including without limitation all interior glass, doors, door closures, hardware, fixtures, electrical, plumbing, fire extinguisher equipment and other equipment installed in the Premises and all Alterations constructed by Tenant pursuant to Section 7.3 below. Co., Inc. v. Washington Suburban Sanitary Comm'n, 247 Md. Tenants Personal Property Tenant shall provide and maintain (or cause to be provided and maintained) throughout the Term all such Tenants Personal Property as shall be necessary in order to operate in compliance with applicable material Legal Requirements and Insurance Requirements and otherwise in accordance with customary practice in the industry for the Permitted Use. . OWNER shall give 24 hours advance notice and may enter for the purpose of showing the premises during normal business hours to prospective renters, buyers, lenders, for smoke alarm inspections, and/or for normal inspections and repairs. (A) After the Occupancy Date, Lessee expressly agrees and warrants that the Leased Premises will be used exclusively as a Champps Restaurant or other casual dining sit -down restaurant. 399, 409 (1959) (holding that restrictive covenant was expressly limited to a designated area); But see Martin v. Weinberg, 205 Md. Lastly, a restrictive use clause states what a tenant is prohibited from doing. Freedman, the tenant next door to Seidler, operated a shoe store. When Freedman began a promotion that included giving away women's handbags and nylon hose as a part of a shoe promotion, Seidler sued the landlord who, in turn, impleaded Freedman as a third-party defendant. The court upheld the damage award to Seidler, which had been supported by unrefuted evidence from an accountant.