How can an existing tenant's exclusivity clause limit what a new commercial landlord can do?
An exclusivity clause in a retail lease promises a tenant that the landlord won't lease other space in the same plaza to a competing business, for example, a lease that guarantees the only coffee shop in the plaza belongs to that tenant. Because the clause is a term of the lease itself, it binds a new owner the same way every other term of an assigned lease does: buying the plaza doesn't wipe it out.
The practical limitation is on future leasing decisions, not just existing ones. A new owner who doesn't know about an exclusivity clause can end up negotiating a lease with a new tenant, only to discover afterward that it breaches an existing tenant's exclusivity rights, exposing the owner to a claim from the protected tenant and potentially having to unwind or restructure the new deal.
Before buying a plaza, a buyer's lawyer should review every lease specifically for exclusivity language, not just rent and term, and keep a clear record of which uses are off-limits for future leasing. This is especially important in smaller plazas where a handful of exclusivity clauses can meaningfully narrow what tenant mix is still available to offer.
Key takeaways
- Exclusivity clauses bind a new plaza owner because they are terms of the existing, assigned lease.
- They restrict what future tenants a new owner can bring into the same plaza, not just current ones.
- Leasing to a new tenant without checking existing exclusivity clauses risks a claim from the protected tenant.
- Review every lease for exclusivity language before closing and track it for future leasing decisions.