Don't Say ‘Accessories’ in Use Clause

A retail tenant may ask you to let it use its space to sell certain merchandise and “accessories.” But by doing so, you may unwittingly let the tenant sell many more items than you intend. That's because the word “accessories” is so vague. It can mean almost any type of clothing or equipment, warns Toronto attorney Harvey M. Haber. And that could spell big trouble for you.

How You Can Get Burned

Here's an example of how you can get burned by letting the tenant sell accessories.

Example: The tenant's use clause says the tenant can sell men's clothing and accessories. The tenant starts out by selling only men's clothing. But when its sales drop, it adds men's shoes to its inventory—putting it into direct competition with your shoe store tenant. You had already given the shoe store tenant the exclusive right to sell men's shoes at your center. So you ask the men's clothing tenant to stop selling shoes. The tenant refuses. Its lease, the tenant argues, allows it to sell shoes, because men's shoes are accessories to men's clothing. As a result, you could be sued by the shoe store tenant for violating its exclusive.

To maintain better control over what a tenant is selling, don't let it sell accessories. Instead, make sure your lease includes a detailed list of all merchandise that the tenant can sell, Haber advises. Plus, make sure the lease expressly bars the tenant from selling any accessories that violate another tenant's exclusive.

Insider Source

Harvey M. Haber, QC: Partner, Goldman Sloan Nash & Haber LLP, 250 Dundas St. W., Ste. 603, Toronto, ON M5T 2Z5; (416) 597-3392.