Why Use an Exclusive Use Clause?

If you are a business owner and in the process of negotiating the terms of your commercial lease, you will want to be sure to include an exclusive use clause to the document and negotiate the terms with the landlord. Exclusive use clauses are intended to protect a tenant’s business by ensuring that the named tenant is the only tenant in a particular shopping center that can sell or offer to sell specific products or services. In some cases (generally, where a tenant has more bargaining power), an exclusive use clause may extend to any other properties owned by the landlord or an affiliate of the landlord within a certain radius.

The scope of the exclusive clause greatly depends on the nature of the business. Narrowly-focused businesses can be served with narrow clauses; however, if a business offers a wide scope of products or services, then the clause will have to be carefully considered by both parties. For instance, a national retailer that sells coffee for on-site consumption may have an interest in protecting against another store selling any kind of hot beverage, even though it only derives minimal profit from its hot tea and hot chocolate sales. A clause that prohibited another store from selling any hot beverage would significantly restrict the landlord’s options for possible tenants. Bookstores that offer hot chocolate or even a gas station that offers self-serve coffee would be prohibited from leasing in the same retail space even though these places are not in direct competition with the coffee chain. Landlords will be reluctant to restrict its other spaces from ancillary uses that do not directly pose a threat to the tenant’s primary business.

A landlord and tenant could reach a compromise when it comes to the scenario above by agreeing to place a capped amount on the sales that another tenant may derive from the ancillary uses of the negotiating tenant (i.e., the sale of hot beverages). Alternatively, the parties could agree to restrictions on advertising or display areas that other tenants would have to abide by if leasing the space. When it comes to exclusive use clauses, there are several ways to help both landlord and tenant strike the right bargain. A well-drafted clause offers the tenant adequate protection from competition without stifling the landlord’s ability to attract other compatible businesses for the retail area.

If you are considering entering into a commercial lease and need assistance in reviewing or drafting provisions, contact a McBrayer real estate attorney today.


Christopher A. Richardson is an associate at McBrayer, McGinnis, Leslie & Kirkland, PLLC in the Louisville, KY office. Mr. Richardson concentrates primarily in real estate, where he is experienced in residential and commercial closing transactions, landlord/tenant relations, and mortgage lien enforcement/foreclosure. Mr. Richardson has closed innumerable secondary market and portfolio residential real estate transactions and his commercial practice ranges from short-term collateralized financing and construction lending to development revolving lines of credit. He can be reached at 502-327-5400 or crichardson@mmlk.com.

This article is intended as a summary of  federal and state law and does not constitute legal advice.


When Disaster Strikes

In Kentucky, the arrival of spring is unfortunately accompanied by wild weather. Tornadoes and flash flooding can happen without a moment’s notice. You cannot stop severe weather but, you can prepare for it. When disaster strikes, property and casualty insurers must spring into action with disaster response plans. How quickly an insurer can help return someone’s life back to normal is largely dependent on how well you, the insured, are equipped to weather the storm. Here are some tips to help you plan for the unexpected:

  • Create a personal property inventory containing information and photographs of valuable items that you own. Update the inventory periodically.
  • Safeguard your records. Store copies of your personal property inventory, insurance policy, and other important documents in a safe place outside of your home, such as a safe deposit box. Also consider scanning/uploading copies of these documents into a password-protected digital dropbox or portable hard-drive so they can be accessed from anywhere if need be at a later date.
  • If you sustain real or personal property damage as a result of a natural disaster, contact your insurance company agent immediately to report the damage. If you cannot reach your agent, call your insurance company’s toll-free number.
  • If you have to temporarily relocate, be sure to supply the insurance company or agent with an address and number where they can contact you. Many insurance policies offer additional living expenses (ALE) if you are forced to move out of your home due to damage. ALE can be used to reimburse for temporary expenses such as rent, utilities and moving costs.
  • Catalog the extent of the damage. Take photographs and/or video of damaged property and write down and or locate any information you can regarding value, purchase date, repair costs, etc. This will help expedite your claim.
  • Before throwing out, repairing or discarding damaged property, be sure that a representative of your insurance company has inspected the damage so that an assessment can be completed.
  • If you have to make emergency repairs, keep the receipts for such repairs. Do not make permanent repairs without speaking to your company or agent, as unauthorized repairs may not be reimbursable.
  • Contact contractors to arrange for the repair of your home. Get multiple bids for the proposed repair.
  • If your roof has been damaged, a temporary roof may be necessary to prevent further damage. Insurance policies require you to protect your property from further future damage. If you have a hole in your roof, most roofing companies will provide temporary repairs.

After a natural disaster, it may take several days, or even weeks, for an insurance company representative to inspect and assess damage. Insurance companies and agents do their best to help pick up the pieces, but they need your help. The process can be frustrating for all parties, but it runs more smoothly when you, the insured, are prepared to assist the insurance company in the claim process.

After the sky has fallen (or the water has risen), your cooperation, patience and documentation go a long way to resolving an insurance claim efficiently and getting your life back to normal.



Jason S. Morgan is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC. Mr. Morgan actively represents large, small, established, and new real estate developers and homeowners beginning with the planning phase of a proposed development through zoning changes, development plan approval, financing and the land acquisition processes.  He also has extensive experience with residential and commercial construction and insurance litigation. He is located in the firm’s Lexington office and can be reached at  jmorgan@mmlk.com or at (859) 231-8780.

Lenders Take Note: CFPB Issues Guide to Forms

Big changes are in store for real estate closings in 2015 (we first wrote about it here). Now, lenders have some guidance from the Consumer Financial Protection Bureau (“CFPB”) as to how complete forms that will become mandatory in August 2015.

For over thirty years, federal law has required lenders to provide two different disclosure forms (the Truth in Lending Statement and Good Faith Estimate) to consumers applying for a mortgage. The law also has generally required two different forms (a final Truth in Lending Statement and a HUD-1 settlement statement) at or shortly before closing on the loan. The forms were developed separately by two different federal agencies, pursuant to two separate acts: the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act of 1974 (“RESPA”).

In an effort to simplify the closing process and help consumers become more informed of their options and obligations, the Consumer Financial Protection Bureau has launched the “Know Before You Owe” campaign – an initiative aimed at reforming the mortgage market. Beginning in August 2015, the two sets of forms issued to consumers will be reduced and replaced with a Loan Estimate Form and Closing Disclosure. These new forms use clear language and are designed to make it easier for the consumer to understand key information, such as the interest rate, monthly payments, and closing costs of the loan.

CFPB’s recently-issued Guide to Forms (available here) provides originators with step-by-step instructions for completing the Loan Estimate and the Closing Disclosure and addresses situations that are expected to arise frequently. The 96-page guide should be reviewed by anyone who routinely participates in the mortgage closing process. The guide specifically states that it may be helpful for settlement service providers, software providers, secondary market participants, and other firms that serve as business partners to creditors.

The Know Before You Owe rules bring about numerous technical and substantive changes to the mortgage closing process. Now is the time for lenders to prepare for the new era of closings by participating in training, reviewing their internal processes, and speaking with an attorney about their new compliance responsibilities.

J. Markham

Joshua J. Markham is a member at McBrayer, McGinnis, Leslie & Kirkland, PLLC in the Lexington, KY office. Mr. Markham practices in virtually every aspect of real estate law, including title examination, title insurance, clearing title issues, deeds, settlement statements, preparation of loan documentation, contract negotiation and preparation, lease negotiation and preparation, and any and all other needs related to residential and commercial real estate matters.He can be reached at jmarkham@mmlk.com or (859) 231-8780, ext. 149.

This article is intended as a summary of federal and state law activities and does not constitute legal advice.


Considerations before Co-Signing

When I was looking for my first apartment, I was a student, had little money and was far from an ideal tenant. Luckily, my parents co-signed on the lease and I was handed the keys to my new place. At the time, I had no idea what risks my parents were taking by putting their signature next to mine on that lease agreement. Now, as a real estate attorney, I often see people co-signing on mortgages – generally a much bigger financial obligation than an apartment – and I wonder if they have considered the hazards associated with signing their name on the dotted line. Not every co-signing situation ends badly, and some work out with no problems at all, but there are times when a co-signor bites off more than they can chew and, as a result, are left with a very bad taste in their mouth from the whole closing process. If you are thinking about serving as a co-signor, I urge you to consider the following:

1)      It will affect your credit report.

If someone has asked you to co-sign on a mortgage it is generally because you have good (or at least sufficient) credit. A co-signed mortgage, like any other loan, will be factored into your credit report, even if you are not making payments. It becomes part of the equation in your debt-to-income ratio. If you apply for a personal loan in the future, it is possible that you could be denied the loan based on the mortgage’s outstanding debt.

2)      You are 100%, not half, liable.

Just because there are two names on the mortgage does not mean that you are only signing up for 50% of the loan liability. If the mortgagor fails to make his or her payments, the lender can look to you for the entire outstanding loan amount. If the lender only sues you for the outstanding amount (which is legally permissible) and you want the mortgagor to also be responsible for the debt, then you will have to sue him or her in order to bring them into the lawsuit.

3)      It is difficult to undo

Co-signing for a loan can be undone, but will require effort from both parties to the mortgage. The only ways to have your name removed as a co-signor are to refinance the mortgage or sell the property. If the mortgagor falls on hard times or your relationship with them sours, it is less likely they will agree to refinance the loan to remove you from the mortgage, or that the bank will permit a refinance to remove you as co-signor in light of the other parties’ financial situation.

Co-signing for a mortgage can be risky and it is important to make an informed decision. For many, when faced with the request from a loved one, saying no can be difficult. If you find yourself in this hard spot, consider contacting a McBrayer real estate attorney about your options. In some cases, there might be other ways to help the individual obtain the loan, such as gifting a part of the down payment on the property. We can work with all parties to achieve the best possible outcome.


Brittany C. MacGregor is an associate attorney practicing in the Lexington office of McBrayer, McGinnis, Leslie & Kirkland, PLLC. She is a graduate of Transylvania University and the University of Kentucky College of Law. Ms. MacGregor’s practice focuses on real estate law, including title examination, title insurance, clearing title issues, deeds, settlement statements, preparation of loan documentation, contract negotiation and preparation, and lease negotiation and preparation. She may be reached at bmacgregor@mmlk.com or at (859) 231-8780.

This article is intended as a summary of federal and state law activities and does not constitute legal advice.