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HOLLAND & HART LLP

The Law Out West[SM]

555 17th St. Suite 3200, Denver, CO 80202

303-295-8000

www.hollandhart.com

TENANTS BEWARE! How to Avoid Loopholes in Your Exclusive Use Provision

You are excited because you have just negotiated an exclusive use provision in your lease that prevents your landlord from leasing space to your competition. Are you really protected? While you may think that you are, you need to be careful about loopholes in the way the clause is drafted. If the clause is drafted as a limited exclusive, and not a true exclusive, you may be vulnerable to neighboring competition.

Let's assume, for example, that you own a coffee shop where you sell coffee and breakfast pastries. The exclusive use provision may be drafted as follows: "Tenant is hereby granted the sole and exclusive privilege in the Shopping Center for operation of a coffee shop."

This type of exclusive is called a limited exclusive. While it may prevent the landlord from leasing space to another coffee shop, it does not prevent the landlord from leasing space to another competing business. For example, landlord would be permitted to lease the space next door to a bagel shop that sells coffee and breakfast items.

Instead of a limited exclusive, you should request a true...