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Use of the Premises

By Harvey M. Haber
March 26, 2014

The use of the premises is of paramount importance to both the landlord and the tenant. As discussed in Part One last month, the tenant wants to sell the broadest possible scope of merchandise, in order to carry on its business. On the other hand, the landlord wants to limit the clause to avoid any overlap of uses as well as any breach of a restrictive covenant given to another tenant in its shopping center. Because the use clause will govern the use of the premises in the event of an assignment or a sublease of the premises (unless both the landlord and the tenant mutually agree to a change in the use clause), its impact will continue to affect both parties in the event the tenant wishes to sell the business.

As mentioned in Part One, today's retailers expand, contract and metamorphose, making it difficult to determine what the store is and to define what it sells. For example, variety stores are becoming junior department stores; junior department stores are becoming department stores; and supermarkets are becoming combination food and general merchandise stores. In addition, there is “hybrid retailing,” where a tenant sells in its premises goods that are entirely unrelated to one another (such as food and clothing) and, of course, there is the “warehouse outlet,” which sells everything imaginable at very competitive prices through large volume purchasing. The recent challenging economic times have also created a niche for super discounted items, often referred to as “dollar stores,” and many landlords are eager to include them in their shopping centers.

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