Hey everybody, Joseph Gozlan with Eureka Business Group here again, and we’re continuing our series about key elements in commercial leases. And today we’re going to talk about usage restrictions. There is a clause in your retail or your commercial lease that is going to define what are you allowed to do as a tenant in the building.

And it’s important for both sides. And let’s talk about both the tenant and the landlord sides in this conversation about the usage restrictions. From the tenant side of things, the landlord is going to restrict what I’m allowed to do. So if I’m at donut stores and I’m coming in and the usage restriction is going to say donut store or a bakery, then I cannot just add another shelf that sells cell phones in my store.

And that is something that is not always favorable. If you have big plans about changing your business or enhancing your business. So that’s why it’s important for you to try to think about it ahead of time and be transparent with the landlord to make sure that when they put the usage restrictions for you, you cover everything you plan on doing within the term of the lease.

Another tip for tenants in this case is to try to make sure that you put restrictions back on the landlord. So if I am a donut shop, I don’t want the landlord to put another donut shop in the retail strip or a bakery in the retail strip because it’s going to compete with my business. And that’s gonna be bad for all of us.

As we manage commercial retail centers, we tell the landlords don’t do that because it’s cannibalizing and you’re destroying two businesses and then you’re gonna have to vacancy. So it’s in the landlord’s best interest to maintain just one, type of business per shopping center, but not all landlords do that.

And so it’s important for you as a tenant to kind of protect yourself on this thing. Now let’s talk about the landlord’s aspect of usage restrictions. As a landlord, I want to make sure that I fill out that form. I’ve seen a lot of contracts that don’t have anything in the usage restrictions, and that causes a lot of trouble.

That causes an entrepreneurial business owner that is doing something X, and he realizes, Oh, this guy next door to me is making a lot of money by doing Y. Let me add Y to my business. And now I’m doing more and that causes issues within the shopping center. So if I’m a bakery and the, and I only do cakes and that was agreed that, there’s a donut store at the end of the shop and I decide that, okay, I’m going to start selling donuts too.

Now we’re cannibalizing on the other tenant and that can cause dispute within the community, within the shopping center. And then that causes trouble to the landlord as well. So as a landlord, we want to make sure that we know exactly what each one of our tenants businesses do and that we restrict them to their thin.

So that opens up the opportunity for us to open other types of businesses that are not in direct competition necessarily. But there might be synergetic. So let’s make sure we have the usage restrictions filled out in our commercial leases and make sure you cover all the consideration whether you’re a tenant or a landlord.

That’s it. My name is Joseph Gozlan. I’m with Eureka Business Group. And if you have any questions about commercial leases, retail, investing in retail, managing retail, we are Retail expert. We’re here in the DFW market in Texas. And you have a question, put it in the comments, , send us an email, give us a phone call.

We’re here to help.