Don't Let Phrase 'Reasonably Acceptable' Cost You Control Over Tenant's Use
Let’s say a dry cleaner wants to lease space in your strip mall. During negotiations, its attorney asks for a use clause permitting use of the premises for not only dry cleaning but also any other uses you find “reasonably acceptable.” It seems fairly unobjectionable, especially since you’re the arbiter of “reasonably acceptable.” So, you agree.
Why You May Come to Regret that Decision
Like beauty, “reasonable” is in the eye of the beholder. That means there’s a pretty good chance for a dispute when you veto a tenant’s proposed new use as unreasonable. And if that dispute lands in court, you may find that the judge’s views on whether a use is reasonable are closer to the tenant’s than your own.
Owner Gets Burned
If you don’t believe it, ask the New York strip mall owner that leased space to a tenant for “no purpose other than a dry cleaning establishment or other retail use reasonably acceptable to” the owner. In this case, the proposed new use was to rent videos. The owner said no. Video rental was a pretty big business back in 1995, and the owner wanted to hang onto the right to rent space to another video store.
But now the owner was boxed in. “Other retail use” meant only uses incidental to the dry cleaning business, the owner argued. The court rejected the interpretation and ruled that the proposed use was reasonable and the owner had to accept it [Kem Cleaners Inc. v. Shaker Pine Inc.: No. 73453, 1995 N.Y. App. Div. LEXIS 7774 (N.Y. Sup. Ct. App. Div., 7/13/95)].
Two Ways to Protect Yourself
There are two ways to ensure this doesn’t happen to you:
- Don’t allow for any uses other than the one(s) expressly spelled out in the lease; and/or
- Allow for other unspecified uses but only if they’re “acceptable,” as opposed to “reasonably acceptable,” to you. Eliminating the word “reasonable” gives you absolute and subjective control over what’s “acceptable” and frees you from the need to justify each decision.