Use Clause

Real Estate Investing Glossary – Malone Global University

Definition

A use clause is a lease provision that defines and limits the specific activities a tenant may conduct within the leased premises. It protects the landlord’s property strategy, tenant mix, and compliance with zoning or regulatory requirements.

Why Use Clauses Matter

Types of Use Clauses

1) Broad Use Clause

Allows a wide range of lawful uses, such as: “Any lawful retail use.” Broad clauses provide flexibility to tenants, but reduce landlord control.

2) Narrow (Restricted) Use Clause

Limits use to a specific concept or product category (e.g., “sale of athletic apparel only”). Narrow clauses help protect tenant mix and reduce conflicts.

3) Exclusive Use Interaction

In retail centers, the use clause must be coordinated with exclusive clauses held by other tenants. A “permitted use” for one tenant can accidentally breach another tenant’s exclusivity.

Common Drafting Elements

Example

A lease states that the premises may be used “solely for a sit-down restaurant serving Italian cuisine, and for no other purpose without landlord’s prior written consent.” If the tenant later wants to pivot to a nightclub concept, that change likely violates the use clause without an amendment.

Operational and Financial Impact

Underwriting Considerations

Common Pitfalls

Related Terms

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