Don’t expect cut and paste clauses today because we’re only going to do some conceptualizing. Once it is settled that a tenant will get the benefit of an exclusive use right, its landlord needs to make sure that its own ability to make a living isn’t imperiled. We’re not going to discuss whether landlords should grant exclusive use rights because sometimes that just what needs to be done to get the rent for an otherwise empty space.

To all get on the same page, let’s try to agree that the legitimate objective of an exclusive use right is to protect a tenant’s core business (i.e., the reason its customers come to the store in the first place) against cannibalization from competing tenants at the same property whose customers come to the property, in part, because the very same “protected” tenant is at the property. Tenants with sufficient bargaining power can stretch that protection to nearby properties owned by the landlord or by affiliates of the landlord, although the rationale is a little weaker. Perhaps the strongest economic argument (or more likely, emotional argument) is that the protected tenant doesn’t want its landlord to use that tenant’s rent money to invest in nearby properties occupied by the “protected” tenant’s competitors. Ruminations may return to that subject in the future, but that’s the last you’ll read of “off-site” restrictions today. [Read more…]