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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Kroaler on February 24, 2021, 08:45:29 AM

Title: Commercial landlord - Anyone seen this clause before?
Post by: Kroaler on February 24, 2021, 08:45:29 AM
Hello,

Just a quick question for anyone who has dealt with commercial landlord leases. 

I'm looking at a property, but the lease the landlord wants signed has a clause that states that the tenant will not start and cannot own any other businesses in a 5 mile radius. I find this odd. I have other commercial leases and all they state is that I cannot operate any business in the leased space that competes with the parent company leasing the space, or other uses of the building that weren't approved as part of the lease.   (Additionally I own another business in a 5 mile radius, so thats sort of out anyway)

I've never seen a clause that states what I can / cant do with other landlords / property within a 5 mile radius.

Has anyone ever seen this before? Maybe its common and I just haven't seen it before? Honestly my impression of the prospective landlord is super low anyway and I would never lease from him - But I want to know everyone's thoughts on a "no other business" clause in a commercial lease.

To me it seems crazy. Imagine a residential landlord trying that shit. "During the term of this lease, tenant may NOT lease / purchase any other living arrangements within a 5 mile radius" - Tennant must rent from me or be homeless.

Title: Re: Commercial landlord - Anyone seen this clause before?
Post by: socaso on February 24, 2021, 09:28:34 AM
I'm trying to wrap my head around WHY that would even be the landlord's business. I don't know a lot about leased commercial space, my dad owned a building and didn't have a clause like that.

I do know that in the area I live commercial space is hurting right now as a lot of employers are downsizing or planning to run their teams virtually forever. If you want the space you could ask them to strike that clause. They might just do it to get a good renter in.
Title: Re: Commercial landlord - Anyone seen this clause before?
Post by: yachi on February 24, 2021, 09:38:12 AM
This seems like one of those policies that should be endlessly mocked with questions the landlord cannot answer without illustrating how stupid the policy is.

So, if you're running a day care out of this landlords space and a nearby gas station is up for sale you can't buy it?  What about a food truck-where you park it 6 miles away, but bring it within the 5 mile radius on occasion?

If your main business is making toys in his leased space, and you decide to branch out to play clothes - is that an "other business"?

If you decide to run an Amazon business where you dropship playhouse kits, are you allowed to think about it in the leased space, or would that place it within the 5 mile radius?

What if you own a pizza place that's 7 miles away, but delivers to areas within the 5 mile radius?

[edit-typos]
Title: Re: Commercial landlord - Anyone seen this clause before?
Post by: Herder of cats on February 24, 2021, 10:44:22 AM
Yes.  I've seen this exact clause (though in my case it was a 3-mile radius).  In my case, the property was owned locally, but was managed by one of the bigger nation-wide property management companies, and what they had provided me looked to essentially just be a form lease.  When I pushed back on that specific clause, the response that I got was basically B.S. about needing to control "business mix", etc. (which, of course, this clause doesn't really even do).  When I pushed back, they removed the clause almost immediately.  I don't know about where you are, but where I am commercial property owners/landlords are scrambling, and prospective commercial tenants have a lot of leverage. 
Title: Re: Commercial landlord - Anyone seen this clause before?
Post by: Kroaler on February 24, 2021, 08:41:26 PM
I personally thought it was a silly clause.  Just wanted to see if it was normal to someone.

As someone else said, how would they even monitor / enforce that with all the loopholes. (The food truck / delivery one was funny)
Title: Re: Commercial landlord - Anyone seen this clause before?
Post by: obstinate on February 26, 2021, 07:28:51 AM
A lot of these clauses are not actively enforced, but exist as a CYA type thing that they can use to find you in default if they need to for any reason. I'd just ask them to strike it from the lease.