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Radius Restriction Clause
Practical Law Glossary Item w-001-4924 (Approx. 3 pages)
Glossary
Radius Restriction Clause
A commercial lease provision prohibiting a tenant from opening a like business operation within a particular radius of the leased premises for a specified period of time. Radius restriction clauses are common in commercial leases with percentage rent provisions such as:
- Shopping center leases.
- Restaurant leases.
Radius restriction clauses are used to protect landlords from adverse consequences that may result if the tenant opens a competing business in the restricted area such as:
- Loss of potential percentage rental income due to reduced sales at the leased premises.
- Loss of customers at the landlord's commercial property.
- Potential tenant default under the lease because of reduced sales and customer diversion.
- Potential lease terminations by other tenants of the commercial property that have co-tenancy clauses tied to the restricted tenant's lease.
Radius restriction clauses typically specify:
- Whether additional parties are included in the restriction, such as tenant affiliates.
- The restricted area of protection.
- The duration of the restriction.
- What qualifies as a competing business.
- What constitutes a violation of the restriction.
- Available remedies for violations.
Generally, to be enforceable, radius restriction clauses must be:
- Reasonable in scope and breadth.
- Narrowly crafted so that they do not unreasonably restrain the tenant.