A lease clause that prohibits a tenant from opening another location of the same business within a specified distance of the leased property. Landlords use radius restrictions to protect percentage rent revenue.
Radius restriction clauses prevent tenants (particularly retail tenants paying percentage rent) from diverting sales to a nearby location, which would reduce the landlord's percentage rent income. The clause defines a geographic radius (typically 1 to 5 miles), the restricted activity (operating a competing business), and the consequences of violation (which may include adding the other location's sales to the percentage rent calculation). Tenants should negotiate the radius size, carve-outs for existing locations, and whether the restriction applies to online sales.
A landlord enforces a 10-mile radius restriction against a tenant who opens a second location 8 miles away. The landlord demands that all sales from the second location be added to the original location's gross sales for percentage rent purposes, significantly increasing the tenant's rent.
Negotiate the smallest reasonable radius and include carve-outs for existing locations and any planned future locations. Ensure the clause does not capture online or delivery sales that are not connected to a physical competing location.
Worried about radius restriction in your lease?
Need to extract lease terms before your audit?
A CAM audit is only as accurate as your lease data. lextract.io extracts 126 structured fields from any commercial lease PDF: CAM definitions, pro-rata share, caps, base year, and audit rights. So you have the exact terms your landlord is supposed to follow.
Go to lextract.ioUpload two PDFs. 14 detection rules. Under 15 minutes. Free.
Find My OverchargesThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.
