CRE glossary
Permitted use
Permitted use is the lease clause defining what business activities the tenant can operate from the leased premises. Narrow definitions ('general office use only') limit the tenant's flexibility to pivot, sublease, or evolve. Broad definitions ('any lawful business permitted by zoning') maximize flexibility. Negotiating broad permitted use is one of the highest-leverage non-economic moves a tenant rep can make.
Landlord-friendly permitted-use clauses are narrow on purpose: 'general office use for the headquarters of [Tenant Name],' 'sale of footwear and apparel only,' 'medical practice limited to dermatology.' Narrow language gives the landlord control: any change requires landlord consent, any sublease must match the use, any pivot can become a default trigger.
Tenant-friendly permitted use is broad. For office: 'general office use plus any other use permitted by applicable law and zoning.' For retail: a defined primary use plus 'any other lawful retail use compatible with the building's zoning.' Watch for landlord exclusions ('except for the following uses: ...'), these are usually competitor protections and the list grows every year.
Permitted use intersects with three other clauses: (1) Sublease/assignment, narrow use blocks tenants from subleasing to companies in different categories. (2) Co-tenancy and exclusive use (retail), narrow use can limit cross-marketing within a center. (3) Default, operating outside permitted use is a non-monetary default with cure-period exposure.
Example
- Narrow (landlord default)
- General office for [Tenant Name] only
- Standard tenant-friendly
- General office use plus any lawful office use permitted by zoning
- Maximum tenant-friendly
- Any lawful use permitted by zoning, subject to building rules
- Retail (specific)
- Sale of [products] plus any compatible retail use within the center's restrictions
Broker perspective
Push for the broadest permitted use you can extract at LOI. 'General office use' is fine; 'general office use AND any other lawful use permitted by zoning' is much better. The cost of broader use is usually zero; the value is enormous when the tenant pivots, expands, or wants to sublease in year 4.
Frequently asked
People also ask
Why do landlords want narrow permitted use?
Control. Narrow use lets the landlord influence subleases, prevent competitor occupancy, and create default leverage if the tenant pivots.
Can I change permitted use mid-term?
Only with landlord consent. Most leases require written amendment. Negotiate broad use at LOI to avoid this.
Does permitted use affect zoning?
Permitted use must comply with zoning, but zoning is set by the city, not the lease. Zoning is the floor; permitted use can be narrower than zoning.
What's a 'continuous operation' clause?
Retail-specific. Requires the tenant to keep operating during defined hours. Tenant-rep brokers fight to limit or eliminate continuous-operation requirements.
Related terms
Letter of intent (LOI)
A non-binding outline of the major business terms, rent, term, TI, options, that becomes the basis for the binding lease.
Exclusive use clause
Tenant's right to be the only operator in a defined business category within the shopping center.
Co-tenancy clause
Retail tenant's right to reduced rent (or termination) if anchor tenants leave or shopping center occupancy drops below a threshold.
Sublease
An existing tenant rents space to a new occupant under the umbrella of the original lease, common when companies downsize.
See permitted use extracted from a real lease.
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