Leasing non-competing business

There is a clause sometimes which happens mostly in the retail space leasing called , “non competing business” the purpose of this clause is to lay out the guidelines for renting or leasing to other businesses that compete directly with an existing tenant.  If you are leasing a retail space, you should determine exactly what you want to be defined in your lease regarding  non competing businesses. As an example, if your lease says the landlord cannot lease to another pet store, can they lease to a department store that sells pet supplies?  The answer is probably yes, because the department store is not a specific pet store.

Landlord’s position on non competing business

To be truthful, most landlords will not limit themselves as to whom they can lease to with competing businesses. If you are relocating, as a tenant you may not want to sign a lease without a non competing clause in your lease. If the landlord feels they won’t have too much demand for future space within your area of expertise, there is a good chance they can agree to your conditions.  In a large shopping center it is common for a tenant to ask for a non compete business clause.  If too many tenants are providing the same product or service, the potential for them going out of business is higher.  The landlord’s exposure is if he agrees to a non compete in the lease language, they could lose a potential big tenant down the road.

As a tenant, checking local zoning laws and regulations prior to executing a lease is always a good idea to make sure the usage is permitted. Once you sign and execute a lease it may be too late.  The basic clause goes like this “Competing Businesses… Landlord agrees not to lease other units within the property to ______________________ businesses during the term of this lease and any extensions or renewals.”

More about commercial real estate leasing … <