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What is a use clause?

If you are considering leasing a commercial property for your restaurant, or if your current restaurant lease is up for renewal, there are some specific contractual issues that you should be sure to give some special attention. One such issue is known as the "use clause," an element of most commercial leases that can be problematic if you are not aware of its provisions. Ideally, you will be able to negotiate some aspects of the clause before signing to ensure you don't run into an avoidable conflict with the landlord in the future.

When reviewing the lease agreement, pay special attention to the restrictions on any particular kinds of use. Especially for a restaurant, it is important to have the contractual flexibility to make frequent changes to the appearance of the space. If there are too many restrictions about "facelift" changes that can be made, or how frequently they are allowed, this can seriously interfere with your ability to run a profitable business. Additionally, a strict use clause can lead to more frequent conflicts with the landlord — which is never a good position to be in — and may threaten your ability to stay in the location. It is advisable to make sure you negotiate a loose enough use clause to give you maximum flexibility for the sake of your business.

If the restaurant in question is also part of a franchise, then the franchise requirements for the location may be in conflict with the use clause, if not cleared ahead of time. This can create a tough situation for franchisees who find themselves contractually obligated to make certain changes to the space that are in conflict with the lease agreement's use clause. Ideally, you will negotiate a use clause that is flexible enough for any franchise requirements that might arise, ensuring that you can avoid use conflicts that could jeopardize your lease.

Lease conflicts in commercial real estate can develop any number of ways. If you find yourself in a commercial lease conflict, including those arising from use conflicts, the guidance of an experienced lawyer can help you explore options for resolution, while ensuring your rights remain protected.

Source: American Bar Association, "Food For Thought," Stephen K. Levey, William E. Myers, Dawn M. Rawls, accessed Sep. 15, 2016

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