The Office Use Clause And the Major Tenant
This LARG takes a look at the office use clause for the major multi-floor credit tenant that knows what it wants and how to get it. The first article ticks through a contractual buffet table of provisions the major tenant might want to negotiate in the use clause. The Lease Clause Critique features two lengthy office use clauses that have been loaded up with pro-tenant modifications. They include, among other goodies, rights for ancillary uses, affiliate use, incidental retail uses, ATM installation, exterior and interior signage, and rights to name the building.
The Major Tenant’s Wish List For the Use Clause
Negotiating the use clause for the major office tenant is a “no-brainer,” right? Just plug in “general office use,” and then move on to the substantive clauses in the lease like rent and operating costs, right? Wrong.
There are a host of possibilities for the major user when it negotiates the office use clause. Among them:
- Expanded definition of “office use” to include ancillary uses such as cafeterias, kitchen facilities, computer rooms, blue print rooms, gymnasium or work out areas and day care facilities.
- Expanded rights regarding who can occupy or “use” the premises as the “tenant,” including permitted use by the tenant’s officers, directors, partners, employees, and business guests and invitees.
- Permitted use of the premises by “affiliates” controlled by the tenant, without the need for an assignment or sublease, even though such affiliates are separate corporations or entities.
- “Expandable use clauses” which give the tenant the right to expand its use of the premises during the term to include any use which any other tenant in the same complex can utilize, so long as that use is legal.
- Permitted retail uses (such as food service, ATM installations, and gift shops) of ground floor or below grade areas of the premises, whether or not related to the tenant’s office use.
- Exclusive use provisions covering the complex for the tenant’s proposed retail uses.
- Interior and exterior signage rights, both for initial installation and subsequent replacement.
- Restrictions on the landlord’s ability to modify “rules and regulations” affecting the premises during the term of the lease.
- Rights to name the building after the tenant’s corporate or trade name, or to rename the building during the term of the lease if other major enumerated tenants vacate the building.
- Limitations upon the tenant’s obligation to comply with future law or regulations mandating modifications to the premises.
- Restrictions upon the landlord’s right to enter the premises for alterations, or to interfere with the tenant’s normal business operations.
- Modification or elimination of pro-landlord “nuisance,” or “harmful use” provisions regarding use of the premises.
- The right of the tenant to transfer negotiated use provisions to assignees or subtenants of less than the entire premises.
End of Excerpt