The Playbook / Clause 4
Prohibited Uses
List of Prohibited Uses; Landlord Enforcement Obligations; Mid-Term Amendments
The Prohibited Uses clause bars specified categories of tenants or activities from the project. Unlike an exclusive use covenant, which protects a particular tenant against competition, prohibited uses operate as a project-wide restriction that the landlord is obligated to enforce. The clause has three negotiation pressure points: scope of the prohibited-use list, landlord’s ability to amend the list mid-term, and the standard of enforcement that landlord owes the tenant.
What the landlord’s form is doing
Landlord wants flexibility to amend the list to accommodate future leasing; tenant resists mid-term changes. Landlord may also seek to disclaim any representation that prohibited uses will be enforced against existing tenants, and to limit enforcement obligations to commercially reasonable efforts rather than a strict covenant.
Landlord may resist tenant-specific prohibitions (e.g., “no other coffee retailer”) because they overlap with the exclusive-use mechanism and impose additional enforcement risk.
What tenants should watch for
Aligning the list with your deal
Square the list with your own use. Confirm none of the prohibited uses conflict with the permitted use, ancillary uses likely to be needed, or anticipated assignees/subtenants. Lock the list in at lease signing; bar landlord from adding new prohibited uses without tenant consent.
Mirror your protections as true exclusives. Confirm that any prohibition tenant is given (e.g., “no other coffee retailer”) is reflected as a true exclusive in tenant’s favor in the Exclusive Use clause, not merely as a Prohibited Use, because Prohibited Uses are landlord enforcement obligations that may be limited or disclaimed.
Food-service exceptions. For restaurant and food-service tenants, negotiate express exceptions to broad nuisance, noise, and odor prohibitions: an exception for normal odors associated with the preparation of food and the operation of a restaurant, and exceptions for drive-through speakers or paging systems where those systems are critical to operations. Strike subjective catch-alls that prohibit any use Landlord deems inconsistent with the character of the project.
Enforcement against neighbors
Negotiate the standard of landlord enforcement: tenant prefers a hard covenant to enforce all lease and occupancy restrictions, with prompt written notice of any violation; landlord prefers a commercially reasonable efforts standard with no notice obligation.
A termination right for defined nuisances. Where a specific neighboring use threatens the tenant’s operations, negotiate a tenant early-termination right triggered by a defined nuisance. Landlord-published model language grants a desirable tenant a limited right to terminate if odors from a named neighboring restaurant interfere with the tenant’s business, subject to stated conditions; the structure generalizes to noise, vibration, and other conduct-based interference.
Overlays that bite the tenant
Watch the hazardous-substances overlap. Landlord forms impose blanket or consent-based prohibitions on hazardous substances, with consent in some forms withholdable in Landlord’s sole discretion; carve out cleaning supplies, office and retail products, and other substances customarily used in the permitted use, in quantities and in a manner compliant with environmental laws.
Resist illegal-use provisions that eliminate materiality and cure. Landlord-published clauses (drafted in response to laws holding landlords accountable for tenants’ unlicensed cannabis sales) make any compliance-with-laws violation, “whether material or immaterial, substantial or insubstantial,” an incurable material default without notice or grace period, and impose strict liability plus an indemnity for statutory penalties. Restore a materiality threshold, notice, and a cure period, and limit any indemnity to penalties caused by the tenant’s own adjudicated violations.
Treat federal illegality as an independent prohibited-use overlay. Co-tenants of a technology center obtained a preliminary injunction blocking a state-licensed marijuana dispensary lease because the use violated the federal Controlled Substances Act and recorded covenants barring federally illegal uses; state and local permits were no defense. A tenant contemplating cannabis-adjacent uses must clear both the lease and any recorded instruments, and an operating tenant may invoke the same covenants against undesirable neighboring uses.
How this typically gets negotiated
The negotiation focuses on whether the prohibited-use list is fixed or amendable, whether the landlord merely promises not to permit violations or affirmatively covenants to enforce the restrictions, and what the tenant may do if a violation persists. Tenants also pay attention to how the list interacts with their own permitted use: a list amended mid-term can reach a use the tenant later wants.
The specific language that resolves each of these points depends on the deal. Talk to Paul about your lease →
How the states treat it
Majority rule. Most jurisdictions enforce commercial use prohibitions between sophisticated parties; the scope of landlord’s enforcement obligation depends on the express covenant language.
REA / recorded restrictions. In many states, project-wide use prohibitions are imposed through a recorded REA rather than the lease, and bind subsequent owners.
Notable cases
Cases addressing prohibited-use enforcement obligations are typically combined with exclusive-use cases. See the Exclusive Use playbook entry for Walgreen Co. v. Sara Creek Property Co., Winn-Dixie Stores, Inc. v. Dolgencorp, LLC, and Frisch’s Restaurants, Inc. v. Shoney’s, Inc.
Gur Assocs. LLC v. Convenience on Eight Corp., 83 Misc. 3d 903, 208 N.Y.S.3d 838, 2024 N.Y. Slip Op. 24095, 1, 2024 WL 1293369 (N.Y. Civ. Ct. 2024). Illegal cannabis sales from the premises supported eviction; use of premises for an illegal business voids the lease and permits reentry, with the landlord bearing the burden of proving the illegal use and the tenant’s knowledge
Game film: real clauses from real leases
Excerpts from commercial leases filed as exhibits with the Securities and Exchange Commission, trimmed for length. Follow the citation for the full document on EDGAR.
“To the fullest extent permitted by Legal Requirements and as a condition and inducement to Tenant to enter into this Lease, Landlord agrees that Landlord will not lease, rent, occupy or permit to be occupied any space in the Shopping Center (and any enlargement or expansion thereof) for a bingo parlor; bar/cocktail lounge (except as incidental to a restaurant); … pawn shop; check cashing service; establishment selling second hand goods; flea market; … a carnival, circus or amusement park; a gas station; … or any facility which is illegal or dangerous, constitutes a nuisance, emits offensive odors, fumes, dust, vapors, loud noise, sounds or vibrations or is inconsistent with community oriented first-class shopping centers in the metropolitan area”
Why it matters. Here the tenant, not the landlord, imposes the prohibited use list on the balance of the shopping center, protecting the retail environment and customer traffic the tenant is paying for.
“In no event shall the Premises be used for any of the Prohibited Uses set forth on Exhibit D attached hereto. … The following types of operations and activities are expressly prohibited on the Premises: 1. automobile/truck maintenance, repair or fueling; 2. battery manufacturing or reclamation; 3. ceramics and jewelry manufacturing or finishing; 4. chemical (organic or inorganic) storage, use or manufacturing; 5. drum recycling; 6. dry cleaning; … 10. hazardous waste treatment, storage, or disposal; … 18. petroleum refining; … 22. above- and/or underground storage tanks; and 23. residential use or occupancy.”
Why it matters. Industrial prohibited use exhibits are driven by environmental risk, so tenants should confirm that actual operations, including routine maintenance, storage tanks, and chemical handling, do not trip a listed category.