Non-Competes in Commercial Leasing Explained

If you’re looking forward to leasing space in a commercial real estate building such as a shopping center, it might be a good idea to have a non-compete clause inserted in the lease agreement. In this guide, you’ll learn everything you need to know about non-competes in commercial leasing:

What Is a Non-Compete Clause?

In a commercial lease, a non-compete clause is an agreement between a potential client and a landlord that the property owner will not rent out the space to a business that draws the same customers as the tenant or a competitor of the tenant. This means that the landlord will not just rent out the remaining commercial spaces to non-competing businesses but will also need to include a clause in those agreements that prohibits those tenants from engaging in specific business activity.

For example, suppose a shopping mall owner leases commercial space to a commercial tenant who sells smart watches. If the landlord agrees to add a non-compete clause in the agreement, the landlord will be bound not to rent out their commercial space to anyone else who sells smart watches. To do this, they’ll need to add a clause in all their subsequent leases that restrict those commercial tenants from selling that product. This limits the new tenants from violating the landlord’s promise later on.

What to Look Out For

When your landlord agrees on non-competes in your commercial lease, ensure that the clause is carefully drafted. This means that it clarifies with specificity the types of sales and business activities that are prohibited. For instance, there might be a retail store whose primary business is garments but also sells other items, including smart watches. As per our example above, the landlord must craft the clause for this specific inventory in question.

In other words, it’s crucial to eliminate all sorts of ambiguities when adding a non-compete clause to the commercial lease agreement.

Commercial Spaces Available In Florida New Jersey and New York

By now, you should have developed an in-depth understanding of non-competes in commercial leasing. If you’re a retailer, try your best to include the clause in your commercial lease agreement. At Milbrook Properties, we have some incredible retail space available. Get in touch to learn more.