When most people think of “exclusive,” they think of relationships. But in the world of commercial real estate, exclusivity is just as important—especially for retail tenants. Whether you’re opening a bakery, gym, clothing boutique, or any other consumer-facing business, you probably don’t want a direct competitor moving in next door.
That’s where the exclusivity clause comes in. And if you don’t have one, you may find yourself in an expensive, frustrating situation with little legal recourse.
This article explains what an exclusivity clause is, how it works in a Massachusetts commercial lease, and why landlords and tenants alike need to understand its implications.
What Is an Exclusivity Clause?
An exclusivity clause is a provision in a commercial lease that prohibits the landlord from leasing space in the same building or shopping center to a direct competitor of the tenant. These clauses are especially common in retail leases, where competition is fierce and customer overlap is high.
For example, a lease might prohibit the landlord from renting to another coffee shop, bakery, or gym within the same plaza or building. The goal is to protect the tenant’s market share and customer base, particularly when the tenant has invested heavily in buildout and branding.
Why Retail Tenants Push for Exclusivity Clauses
Retail tenants often spend tens of thousands of dollars customizing their space. They rely on foot traffic, brand visibility, and local loyalty. If a competing business moves in nearby—offering the same products or services—those investments may not pay off.
An exclusivity clause helps reduce that risk. It can give the tenant confidence that the landlord won’t lease to a similar business just to fill a vacancy, even if it would mean more rent for the landlord.
In Massachusetts, retail tenants with strong bargaining power—especially national or regional brands—often succeed in negotiating exclusivity. But smaller businesses can and should request it too, particularly in areas where the retail mix is carefully curated.
How Landlords Respond
Most landlords are open to exclusivity clauses—within reason. They don’t want to undermine one tenant’s success by introducing direct competition. But they also want flexibility to lease vacant space and avoid potential legal issues under antitrust laws.
Here are some of the common ways landlords limit exclusivity clauses:
- Narrow definitions of competition: Instead of broadly prohibiting “any coffee shop,” the clause may only apply to businesses selling espresso drinks as their primary offering.
- Conditional enforcement: The exclusivity may only apply while the tenant is open and operating in compliance with the lease.
- Time limits: Some landlords cap the exclusivity period (e.g., five years).
- Exceptions for anchor tenants or prior leases: Some landlords carve out exceptions if a national brand or anchor tenant already negotiated similar rights.
It’s also common for landlords to ask for a “radius restriction” in return. That means the tenant agrees not to open another location of the same brand within a certain number of miles, helping the landlord avoid market saturation.
What Happens If the Clause Is Violated?
If the lease includes an exclusivity clause and the landlord violates it by leasing to a competitor, the tenant may have several remedies—depending on how the clause is written.
Some typical remedies in Massachusetts leases include:
- Switching to percentage rent: The tenant stops paying base rent and pays rent based only on a percentage of gross sales. This reduces the financial burden if revenue drops due to competition.
- Going dark: The tenant may be allowed to temporarily close without breaching the lease.
- Lease termination: In some cases, the tenant can terminate the lease entirely and walk away, often with reimbursement for buildout or unamortized capital expenses.
The strength of the tenant’s rights will depend heavily on the specific language in the lease. Generic or unclear exclusivity language may not provide meaningful protection. That’s why it’s essential to work with an attorney who regularly negotiates commercial leases.
Exclusivity Clauses in Office and Industrial Leases
While exclusivity clauses are common in retail leases, they are rare in office and industrial spaces. In an office setting, exclusivity may occasionally apply for businesses with a strong brand identity or a sensitive business model—like financial services or medical practices—but most landlords avoid granting them unless the tenant has significant leverage.
How to Negotiate a Strong Exclusivity Clause
If you’re negotiating a lease as a tenant—or advising a client who is—here are a few practical tips:
- Be specific: Clearly define what type of competitor is restricted. Vague terms like “similar business” can create confusion and weaken enforcement.
- Tie it to performance: Landlords may be more open to exclusivity if it’s contingent on the tenant operating consistently and paying rent on time.
- Limit the scope: Overly broad exclusivity requests may scare landlords off. Focus on direct competitors who pose a real threat.
- Discuss remedies in advance: Include specific remedies in the event of a breach. Don’t assume you can “work it out later.”
- Know your market: In Massachusetts, certain towns and neighborhoods have strict zoning laws or limited commercial space. Make sure your exclusivity request is practical given the local landscape.
Final Thoughts
In Massachusetts commercial leasing, exclusivity clauses are often overlooked—until it’s too late. If you’re a retail tenant, this one provision could protect your investment, your customers, and your bottom line. If you’re a landlord, understanding how these clauses work can help you make smarter leasing decisions and avoid costly disputes.
The key takeaway: don’t assume you’re exclusive just because it feels like a good fit. If it’s not in writing, it doesn’t exist.
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This article is for informational purposes only and is not a substitute for legal advice. For advice on your specific situation, please speak directly with one of our attorneys.
