Many tenants think that the permitted use clauses in their commercial real estate leases are simply loose descriptions of what the tenant intends to do in the premises. They will look at the clause and say to themselves “that is a pretty decent description of my business”, and they don’t think to further negotiate the language. However, in reality, the permitted use clause is a limitation on what you can do in the premises. If it doesn’t say it in your permitted use clause, then you probably can’t do it. For instance, if you have a permitted use clause that says the premises can be used for “an Italian restaurant specializing in pizza and pasta”, then you can’t simply open up a french restaurant or a hamburger restaurant if your Italian restaurant isn’t doing so well, or if you simply decide that another restaurant type might be a better business model for you. Without the landlord’s permission, you actually can’t open any type of business in the premises except for an Italian restaurant specializing in pizza and pasta. What’s worse is that, if you haven’t negotiated that the landlord’s consent to a change of use may not be unreasonably withheld, then the landlord doesn’t even have to be reasonable about disallowing your use change.
If your business isn’t making it, or you want to move or retire, the landlord doesn’t have to let you assign or sublease your premises to another tenant unless they are going to use it as an Italian restaurant specializing in pizza and pasta. Commercial real estate leases, especially retail leases, are fraught with issues like this. Make sure that you think about these clauses instead of making the mistake of assuming that they are just loosely descriptive in nature. For more tips on negotiating commercial real estate leases, see my blog at http://www.langertlaw.com.