Define "Department" in Exclusive

When you're negotiating a lease with a strong tenant that wants an exclusive to sell certain merchandise at your center, it may demand that you agree not to rent space to any other store that has a “department” selling the prohibited merchandise. If you agree to this restriction, you may be setting the stage for a potential dispute with the tenant. That's because the term “department” is so vague that you and the tenant may not agree about its meaning. You may think that a department is a large area, or even an entire floor, of a store, but the tenant could argue that a department is merely a small area with a few shelves devoted to that merchandise, says New Jersey real estate attorney and Insider board member Marc L. Ripp.

To avoid ending up in a dispute with a tenant that has an exclusive, clearly define “department” in the lease's exclusive clause, after checking with your attorney.

Model Lease Language

For the purposes of this Clause, “department” within a store shall mean an area of a store having at least [insert #, e.g., two thousand (2,000)] rentable square feet, [insert #, e.g., three (3)] designated employees, annual gross sales of at least $[insert amount, e.g., one-hundred thousand (100,000)], signage within and around that area indicating the name of the department, and a listing of the department in such store's directory.