Do Your Own Research into Exclusives at Center

November 10, 2017
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If you’re considering leasing space in a large shopping center where you suspect many tenants already have exclusive use clauses, you’ll need some reliable way of determining whether those rights will affect your ability to sell certain products. Some owners offer during negotiations that they can provide a summary of exclusives at the center. Should you rely on this and sign the lease?

No, say real estate experts. You should get additional information. Due diligence is key to deciding whether a particular space is right for your business. Some items that pertain to other tenants are crucial to your success. Namely, the exclusive use clause in other tenants’ leases. You’ll have to honor those rights while trying to protect your interests at the same time. And there’s nothing worse than being surprised by an exclusive of another tenant that will affect your own success. The owner of the space might assure you that it will provide a summary, but that’s dangerous for you. It could make a mistake by leaving out an exclusive or misstating the scope of one. If you rely on a faulty summary and sell products or provide services that violate another tenant’s exclusive, you could end up being sued by the owner for violating your lease—or by the tenant with the exclusive for interfering with its business. Even if you eventually win such a lawsuit, you’ll have wasted time and money defending it.

To avoid these problems, require the owner to give you photocopies of the pages containing the exclusive use language from each tenant’s lease and then attach those copies to your lease. This will ensure that you get accurate and complete information about those exclusives and allow you to: (1) draft a use clause for your lease that allows you to sell the products or provide the services you want—without inadvertently violating the lease; and (2) avoid being sued for selling products or providing services in violation of another tenant’s exclusive. Although the other tenant can’t sue you for violating its lease—after all, you’re not a party to that lease—it can sue you for interfering with its business.

For more details about the information you should get before drafting your language, see “Don't Rely on Owner's Summary of Exclusives at Center,” available to subscribers here