What to Put in a ‘No-Exclusives’ Clause in Your Retail Lease

If you're like many owners, you probably dislike giving exclusives—for many reasons. First, keeping track of exclusives at your center can be an administrative nightmare. Second, if you unintentionally violate a tenant's exclusive because of something another tenant did or didn't do, you could get sued. What's worse, if the other tenant is a rogue tenant that's violating its lease, too, you could end up in a courtroom battling both the rogue tenant and the tenant with the exclusive.

To avoid these problems, some owners have decided to ban exclusives at their new centers. (These centers are known as “go naked” or “give none, get none” centers.) But when a savvy tenant is told that no center tenant will be granted any exclusives, the tenant will demand that the owner state this in the lease. Although a few leases are starting to have clauses that do this, those clauses are still uncommon and may not have all the protection the center owner needs.

If you decide to make your centers a give none, get none center, we'll tell you what you should say in your lease to protect yourself. And there's a Model Lease Clause, on p. 6, that you can adapt and use for your lease.

What Clauses Typically Say

Denver attorney Neil B. Oberfeld points out that when a lease has a “no-exclusives” clause, it typically says that:

• The tenant agrees that it won't get an exclusive at your center [Clause, par. a];

• You agree that the tenant and its successors, assignees, and subtenants won't be subject to any exclusive of any other tenant at your center that would prevent them from selling any merchandise allowed by the use clause [Clause, par. a]; and

• You agree that you haven't already signed any lease (nor will you sign any future lease) that could impose an exclusive on the tenant or its successors, assignees, or subtenants [Clause, par. b].

Get Right to Grant Future Exclusives

Ideally, having a give none, get none center will benefit you by letting you remain in sole control over the tenant balance in your center. But you may find that the ban on exclusives is no longer a viable strategy for your center—for example, if it has kept many desirable prospects from renting space at your center and your center has suffered financially because of it, Oberfeld explains.

To protect your interests—and give yourself as many options as possible—get the right to undo this arrangement if it no longer works for your center. How can you do this? No savvy tenant that agrees to an exclusives ban will simply agree in the lease to let you lift the ban when it no longer works for you, says Oberfeld. So you'll need to compromise: Have the no-exclusives clause say that if you decide to revoke the ban on exclusives—and grant an exclusive to a future tenant—you agree to:

• Grandfather the tenant—say that the tenant and its successors, assignees, and subtenants won't be subject to any such future exclusives; and

• Grant the tenant its own exclusive, which you'll need to set out in the lease, says Oberfeld. But make it clear that this exclusive applies only to future tenants. Any existing tenants at the time the exclusive goes into effect will be grandfathered—just as the tenant will be grandfathered, he says [Clause, pars. c & d].

CLLI Source

Neil B. Oberfeld, Esq.: Member, Isaacson, Rosenbaum, Woods & Levy, PC, 633 17th St., Ste. 2200, Denver, CO 80202; (303) 292-5656.