Understanding Broader Use Provisions in Commercial Leases

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Understanding Broader Use Provisions in Commercial Leases
Business Law, Landlord Tenant

Lease agreements contain many different provisions, including broader use provisions. These leases and Arizona law form the basis for the legal relationships between tenants and landlords. These agreements outline the rights and responsibilities of both parties as to the real estate. Since provisions in these leases vary substantially, both landlords and tenants must ensure that they fully understand their obligations when entering a commercial lease.

As legal matters or disputes arise throughout your commercial lease, an Arizona real estate attorney at Provident Law® can represent your interests. Call our office today at (480) 388-3343 to schedule a time to talk with a real estate lawyer about your legal issue.

Generally, broader use provisions in a lease define the scope of the tenant’s permitted use of the leased commercial real estate. These provisions typically designate how tenants can use the space and often how they cannot. Broader use provisions ensure that the tenant uses the real estate as the landlord intended it to and place limits on the scope of the tenant’s business operations within the property. While various broader use provisions exist, some broader use provisions commonly appear in commercial leases.

Types of Broader Use Provisions

Assignment and Subletting Provision

Commercial leases typically address the possibility of the tenant assigning the lease to another party or subletting the real estate to another tenant. Typically, if this provision allows any assignment and/or subletting, the tenant must get the landlord’s permission before doing so. This provision allows the landlord to control new tenants moving into the property and the businesses they intend to operate.

Changes in Use Provisions

Some leases specify the process a tenant must follow if they wish to change the existing broader use provisions in the lease. Typically, the tenant must go through a process outlined in the changes to use provision to get the landlord’s approval for the change in use. If the tenant and landlord agree on the changes in use, they can execute an addendum to the existing lease or newly renegotiated lease altogether.

Exclusive Use Provisions

A tenant may request an exclusive use provision in a commercial lease, often when more than one business is located in a commercial space. For instance, if the tenant intends to operate a jewelry store, an exclusive use provision in the lease may prohibit the landlord from leasing another nearby space to a competing jewelry store. The exclusive use provision would state that the tenant is the only business allowed to sell jewelry in the commercial development or immediate vicinity. This type of provision prevents the landlord from placing one tenant in direct competition with another, which can harm the first tenant’s business.

Legal Compliance Provisions

Commercial leases typically include a legal compliance provision stating that tenants must comply with all applicable local, state, and federal laws, regulations, and ordinances. A legal compliance provision is important to protect the landlord, who can be liable for any illegal use of the property, such as failure to secure necessary permits or licenses, zoning law violations, and environmental regulation violations.

Permitted Use Provisions

A permitted use provision outlines how the parties agree to use the space. For instance, if the tenant is leasing the space to operate a retail shoe store, a narrow permitted use provision will state that the tenant may only operate a shoe store in the leased premises. On the other hand, the parties may agree to a broad permitted use provision, such as allowing the tenant to use the property to operate any legal business. The permitted used provision may be general or very specific, depending on the parties’ desires.

Restriction Provisions

A restriction provision in a commercial lease outlines what a tenant cannot do with the leased space. This provision may be necessary to adhere to zoning requirements or to control the type of business the property owner wishes to have operating in the leased space. Other motivations for a restriction provision might be limiting the property owner’s liability, avoiding conflicts with neighboring tenants, or making the commercial development more attractive to other tenants. A landlord may restrict a whole class of businesses from renting the space, such as liquor stores or government entities, or restrict “vice” or “sin” businesses, such as massage parlors, adult novelty stores, tobacco stores, and liquor stores.

We Are Here to Assist You with Your Arizona Real Estate Matter

Our goal is to assist you in understanding your legal rights and responsibilities before entering a commercial lease. We will advocate on your behalf throughout your commercial lease transaction or as legal issues throughout the landlord-tenant relationship. Contact the offices of Provident Law® today at (480) 388-3343 or online and schedule an appointment to speak with an Arizona real estate attorney about your legal matter.

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