Leasing commercial space is a major investment, but many businesses sign commercial leases without legal guidance—leaving themselves vulnerable to direct competition near their location or other unfavorable lease terms. In Texas, one powerful way to protect your storefront is by negotiating key lease clauses upfront. One of the most overlooked but essential clauses? The exclusivity clause.
What Is an Exclusivity Clause?
An exclusivity clause in a commercial lease prevents the landlord from renting nearby space in the same retail center to a competitor. For example, if you're opening a coffee shop, the clause might prevent another coffee shop or similar beverage business from moving into the same strip center.
In one case discussed on our podcast (The Weekly Docket), a small coffee shop owner in Houston was doing well—until a Starbucks opened in the same shopping center. The coffee giant's drive-thru line blocked access and drained customers. With no exclusivity clause in the lease, the landlord wasn’t restricted from leasing to a competing coffee shop. A well-drafted exclusivity clause would have provided legal leverage and practical protection.
Customize the Clause for Your Business
It’s not enough to simply say, “no other coffee shops.” A good exclusivity clause should:
- Define exactly what kind of businesses are considered competitors.
- Include remedies or damages if the landlord violates the clause.
- Optionally, include liquidated damages (a pre-agreed amount of compensation) for a breach—keeping in mind that Texas law prohibits punitive damages in contract clauses.
Pro tip: If you’re leasing in a busy retail center with a mix of tenants like dentists, nail salons, and dry cleaners, landlords are often open to exclusivity clauses as a way to attract and retain a healthy tenant mix.
Final Takeaway
Businesses in Texas need to treat their commercial lease as seriously as their business plan. With the right legal provisions—especially exclusivity—you can create a competitive edge and protect the future of your business.
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