The Use Clause in a Commercial Lease: Why a Narrow Permitted Use Can Cap Your Business — and How to Write One That Doesn’t
A dental practice signed a lease with a permitted use clause that read: ‘General dentistry services only.’
Three years later, a private equity group approached to acquire the practice. Their growth thesis depended on adding high-margin ancillaries: IV therapy, aesthetic services, a small in-house pharmacy. All of them would violate the permitted use clause. All of them were prohibited without landlord consent.
The landlord discovered this dynamic during the acquisition process. They demanded a lease amendment. The amendment cost the seller six figures in concessions to push through before the deal closed.
The use clause didn’t fail at signing. It failed at the moment the business needed to evolve. And that’s exactly when it’s hardest to fix.
This post explains what a use clause is, how it can quietly cap your business, and how to negotiate one that protects both your current operation and your future options.
If you want to know how your permitted use is defined and where the restrictions are, run your lease through sasir.ai — our AI-powered lease analysis tool. The first scan is free.
What the Use Clause Is
The use clause — also called the permitted use clause or permitted use provision — defines what your business is allowed to do in the leased space. It’s both a permission and a restriction: it permits you to operate as described, and it prohibits anything outside that description.
From the landlord’s perspective, the use clause serves a legitimate purpose. They need to know what’s happening in their building for insurance, zoning, co-tenancy, and exclusivity purposes. A landlord who has promised another tenant that no competing business will operate in the center needs the use clause to enforce that commitment.
From the tenant’s perspective, the use clause is one of the most consequential provisions in the lease — not because of what it says today, but because of what it prevents in the future. And most tenants sign the landlord’s first draft without pushing back.
How a Use Clause Can Cap Your Business
Three scenarios where a narrow use clause creates real problems:
The business pivot. Markets change. Customer needs evolve. A fitness studio that wants to add nutrition counseling, a café that wants to add alcohol service, a retail store that wants to add a service component — all of these may require landlord consent or a lease amendment if the original use clause is narrowly written. Without consent, operating outside the permitted use is a lease default.
The business sale. As in the dental practice example, a buyer’s growth plan often depends on adding revenue streams that go beyond the original permitted use. If the lease doesn’t accommodate that growth, the buyer’s thesis is compromised — which means the seller’s price is compromised. A narrowly written use clause doesn’t just limit operations; it limits business value.
The franchise relationship. Franchisors regularly update their systems, add menu items, introduce new service offerings, and change operational requirements. If the franchise’s use clause is written too narrowly, franchise system updates may create a conflict with the lease. Franchisees need use clauses broad enough to accommodate the franchisor’s evolving requirements throughout the lease term.
A use clause that fits your business today may not fit it in three years. The question to ask at signing is not ‘does this describe what I do?’ but ‘does this accommodate what I might need to do?’
Narrow vs. Broad: The Spectrum and What It Means
Use clauses sit on a spectrum from highly specific to deliberately broad.
Highly specific: ‘General dentistry services only.’ ‘Sale of women’s apparel only.’ ‘Yoga and group fitness instruction only.’ Each of these creates a hard boundary around the current operation with no room for evolution.
Moderately broad: ‘Healthcare services, including but not limited to dentistry, aesthetic services, and allied health services.’ ‘Retail sale of apparel, accessories, and related lifestyle products.’ These descriptions are anchored to the core business but leave room for adjacent offerings.
Broad with general catch-all: ‘Any lawful retail or service use.’ This is the most flexible structure for the tenant — and the one landlords are most likely to push back on, particularly in multi-tenant centers where other exclusivity and co-tenancy protections are in play.
The goal at negotiation: push the use clause as far toward the broad end of the spectrum as the landlord will accept, while being specific enough that your core business isn’t threatened by ambiguity in the other direction.
The ‘Continuous Operation’ Companion Clause
A related provision worth watching: the continuous operation clause. Some commercial leases — particularly in retail centers — require the tenant to actively operate their business during defined hours for the duration of the lease. If the business slows, if you want to reduce hours, or if you want to temporarily close, a continuous operation clause can create a default obligation.
Continuous operation clauses are most common in shopping center leases where your foot traffic benefits other tenants. Negotiate to limit continuous operation requirements to reasonable business hours, include exceptions for renovation, emergency, and force majeure, and avoid language that requires operation at any specific revenue or activity level.
The Use Clause and the Exclusivity Clause: They Work Together
The use clause and the exclusivity clause interact directly. Your use clause describes what you do. Your exclusivity clause protects you from other tenants doing the same thing.
If your use clause is broad and your exclusivity clause is narrow, you may be permitted to do things that competing tenants are also permitted to do. If your use clause is narrow and your exclusivity is broad, you’re protected in your category but can’t grow outside it.
The right combination: a use clause broad enough to accommodate your business evolution, paired with an exclusivity clause specific enough to protect your core revenue category from direct competition within the property.
What to Negotiate
Push for a broad use clause: anchor to your core business category with a catch-all for related and ancillary services
Avoid hyper-specific language that defines your business by its current service menu rather than its customer category
Include a ‘related and ancillary uses’ catch-all: ‘...and any other uses incidental to or reasonably related to the foregoing’
If the landlord insists on a narrow use, negotiate an amendment process with defined timelines and a ‘not unreasonably withheld’ consent standard for use expansions
If you’re a franchisee, ensure the use clause accommodates the franchisor’s full current and anticipated system requirements
If a business sale is a future possibility, ensure the permitted use is broad enough to accommodate a buyer’s likely growth thesis
Negotiate out or limit any continuous operation obligation
The Bottom Line
A use clause that fits your business today may not fit it in three years. The pivot you need, the acquirer’s growth plan, the franchisor’s system update — all of these can be blocked by language you signed without pushing back.
Ask at signing: does this accommodate what I might need to do? If the answer is uncertain, negotiate for broader language before you commit.
If you’re navigating a commercial lease, these additional resources may help:
