Landlord’s objective:

• to maintain the investment value of the Property by controlling the type of business carried on there;
• where the Property is part of a larger development, such as shopping centre or retail park, to make sure that the mix of uses is attractive to customers and other potential tenants; but
• to avoid being so restrictive that the tenant gets a discount when the rent is reviewed.

Tenant’s objective:

• to be able to use the Property for its current business;
• to have flexibility to change the use if the tenant wants to assign the lease or sub-let to another occupier; but
• to avoid paying higher rent for a use that is unnecessarily wide.

Permitted use

The lease should set out clearly what business the tenant is allowed carry on at the Property. This is usually expressed as a negative covenant, for example “Not to use the Property other than as ….”. A clause like this gives the landlord absolute control over the use of the Property, as there is no statutory obligation to act reasonably if the tenant requests a change of use. This degree of control usually comes at a price, because a very restrictive use will often mean the tenant gets a discount when the rent review is being settled. At the other extreme, a wide permitted use may enable the landlord to argue for an increased rent on review. A common compromise is for the user clause to refer to a specific class of uses in the current Town and Country Planning (Use Classes) Order, with an obligation on the landlord not unreasonably to withhold consent to a change of use within the specified class.

Tenant mix policies

Landlords of retail developments are increasingly keen to manage the mix of shops and services offered to customers. If a landlord can show that it has a genuine and reasonable tenant mix policy, it is likely to be reasonable for the landlord to refuse to consent to a change of use that does not fit that policy (Moss Bros Group plc v CSC Properties Ltd [1999] EGCS 47).

Competing uses

The tenant may want to make sure that nearby premises are not let to businesses that compete with its own. The most reliable way to achieve this is for the landlord to covenant

• not to use or permit adjoining premises to be used for the specified use;
• not to sell or let those premises without imposing an appropriate restriction; and
• to enforce the restriction when required to do so.