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Can a restrictive covenant in your lease affect your rebranding?

On Behalf of | Dec 20, 2021 | Transactional Services |

Commercial leases are complex legal instruments. They establish obligations worth tens of thousands of dollars between a business and the landlord that may persist for many years.

Commercial tenants often focus on particular terms in their leases, including the duration of the lease and the consequences for an early termination. They may fail to consider that there are numerous other issues addressed in the lease that could have implications for their business.

For example, landlords frequently impose restrictive covenants regarding the use of the property. Such clauses could limit your opportunities when trying to rebrand your company or change your business model.

Landlords may limit what you can do in your rented space

While you may pay a fair market rate for rent and have a lease that lasts for several years, that does not inherently mean you have the right to do whatever you want with your rented space. Your landlord can restrict certain activities to protect their property’s value and the ability of other tenants to use nearby units.

For example, a commercial landlord might limit how many visitors one tenant has, how much noise a company generates or what hours they operate their business. They may impose additional insurance or maintenance responsibilities if a tenant changes their business model.

In some cases, explaining to a landlord that you have started redeveloping your business model could convince them to work with you and negotiate new lease terms that are less restrictive. Other times, you may need to delay rebranding or completely change your approach because your new business functions are not permissible under your current lease.