Lease agreements form the foundation of a landlord-tenant relationship, defining the rights and responsibilities of both parties. Among the crucial elements of these agreements for commercial properties are the broader use provisions, which establish the parameters for how tenants can utilize the leased premises.
These provisions play a vital role in clarifying the permissible activities and purposes for which the tenant can use the space, while also addressing restrictions and obligations that ensure the property is used in a manner that aligns with the landlord’s interests and regulatory requirements. Read on to learn about the significance of broader use provisions in commercial lease agreements, their key components and considerations and their impact on both landlords and tenants.
What are broader use provisions in commercial lease agreements?
Generally speaking, broader use provisions in commercial lease agreements refer to clauses that define and govern the permitted use of the leased premises by the tenant. These provisions outline the specific activities or purposes for which the leased space can be utilized, as well as how the space cannot be used. They are important because they clarify the intended scope of the tenant’s business operations within the leased property and help establish boundaries and expectations between the landlord and tenant.
The following are some use provisions to consider, whether drafting a commercial lease for an owned property or researching spaces in which to operate a business.
Permitted Use
The lease agreement will typically specify the permitted use of the premises. This may be a general description of the tenant’s business or specific activities allowed. For example, a retail lease might specify that the premises can only be used for a clothing store.
Exclusive Use
In some cases, the tenant may negotiate an exclusive use provision, which grants them the exclusive right to engage in a particular business activity within the leased property. For instance, a GNC in a shopping mall might have an exclusive use provision stating that they are the only business allowed to sell health and wellness products. This prevents the landlord from leasing nearby spaces to competitors (like Vitamin Shoppe) engaged in the same type of business.
Restrictions
The lease agreement may also contain restrictions on certain activities or uses. These restrictions can be aimed at maintaining the property’s integrity, complying with zoning regulations or protecting the interests of other tenants or the landlord. For instance, a lease agreement might prohibit the tenant from using the premises for manufacturing or conducting hazardous operations.
Changes to Use
If the tenant wishes to modify or expand the permitted use of the premises beyond what is initially specified in the lease agreement, it may need to seek the landlord’s approval. The process for obtaining such approval should be outlined in the lease agreement, or the landlord and tenant can collaborate on an updated lease agreement that governs the relationship for the remaining duration.
Compliance with Laws and Regulations
Broader use provisions often include a requirement for the tenant to comply with all applicable laws, regulations, and permits related to their business activities. This ensures that the tenant operates in accordance with legal requirements and maintains necessary licenses and permits. Compliance protects both the landlord and tenant, as landlords are held liable for illegal activity conducted on its property.
Landlord’s Consent
A typical lease agreement will state that the tenant must obtain the landlord’s consent before assigning or subletting the premises. This provides the landlord with control over incoming tenants and the activities they intend to conduct within the leased space.
It’s important for both landlords and tenants to carefully review and negotiate broader use provisions to ensure that they align with their respective needs and expectations. Consulting with experienced legal professionals specializing in real estate or commercial leases can help parties understand the implications of these provisions and negotiate favorable terms.
The Impact of Broader Use Provisions on Landlords and Tenants
Broader use provisions in commercial lease agreements have a significant impact on both landlords and tenants. For landlords, these provisions help maintain control over the use of their property, protect their interests and the interests of existing tenants, and ensure compliance with zoning and regulatory requirements. They provide clarity on the permissible activities and restrictions, enabling landlords to safeguard the property’s value and mitigate potential risks.
On the other hand, tenants benefit from broader use provisions by having clear guidelines on how they can operate their businesses within the leased premises. These provisions provide a framework for expansion or modifications to their business activities, while also granting exclusive use rights in some cases. Overall, broader use provisions foster transparency, protect property values, and facilitate a harmonious landlord-tenant relationship by setting clear expectations for both parties.
Consult with an Experienced Real Estate Attorney
With broader use provisions, landlords can help ensure their tenants’ operations are in compliance with Arizona law, while also protecting the interests of all relevant parties. Investors should partner with an experienced real estate attorney who is familiar with landlord/tenant laws and how they can impact their investments. Gottlieb Law provides industry-leading legal representation for anyone involved in Arizona commercial real estate. Contact our firm today at 602-899-8188 or schedule an initial consultation on our contact us page.
