The Exclusivity Clause in Retail Leases: Your Landlord’s Promise Not to Lease to Your Competitor

Every retail tenant asks for it. Most get a sentence that reads well and does nothing. The clause is only worth what its four answers are worth: who is a competitor, what land it covers, who is already carved out, and what happens the morning it is broken.

I am Arthur Zhao. Here is the pattern I keep seeing on the tenant side: rent gets negotiated for three weeks, the exclusivity clause gets negotiated in one email. Then twenty months later a unit turns over, something that looks a great deal like your business opens forty feet away, and you pull out the lease to discover the clause never said what “similar business” means and never said what the landlord owes you for breaking it. At that point you have two options, both bad — pay a lawyer to argue about an adjective, or absorb it. This article is about the version of that clause you should have signed instead. It is a contract-mechanics piece, so there are no market statistics in it; the only numbers here are statutory, and they are sourced.

First, three promises that get confused with each other

Exclusivity controls who the landlord may let in — no future lease at this property to a business of a defined type. Co-tenancy controls who the landlord must keep — if the anchor goes dark or occupancy falls below a threshold, your rent drops or you can leave. They point in opposite directions and are negotiated against completely different landlord instincts; do not trade one away thinking you still have the other. And exclusive buyer representation — the agency agreement between a buyer and their brokerage — has nothing to do with either. Same word, unrelated instrument.

This piece is only about the first one.

Question 1: what makes someone a competitor?

This is the load-bearing wall. Almost every exclusivity dispute is really a definition dispute. Three drafting approaches, in ascending order of usefulness:

Threshold drafting is what lets the deal actually close. It stops a genuine rival, while still letting the landlord lease to the pharmacy or grocer who happens to carry a little of what you sell. You were never going to block those anyway; asking for a definition that does is how tenants lose the whole clause.

Question 2: how much land does the promise actually bind?

The word “Landlord” in that sentence is doing less work than you think. Three leaks to close:

• The boundary. If the clause says the building, the landlord can build a freestanding pad on the parcel next door and sell your product from it, lawfully. Push for the shopping centre as a whole, with a site plan attached as a schedule so the protected area is a picture, not an argument.
• The next owner. Leases get sold. The clause should bind successors and assigns, and in a deal that matters you register notice on title. Otherwise a purchaser can treat the exclusive as somebody else’s contract problem.
• Land acquired later. If your landlord buys the adjacent parcel in year three, is it covered? Silence means no.

Note the tension, because it runs through the rest of this article: every leak you close makes the clause broader, and breadth is now the thing that attracts regulatory scrutiny.

Question 3: who has already been carved out?

The landlord will insert an existing tenant carve-out — the exclusive does not apply to tenants already in place, or to their renewals, expansions, assignments and permitted uses. That is fair on its face. No landlord can retroactively rewrite somebody else’s lease.

It is also where most exclusivity clauses quietly die, because the carve-out is usually drafted far wider than fairness requires. Four things to insist on:

• A schedule, not an adjective. Name the carved-out tenants and their units. Refuse “all existing tenants” as a category.
• Disclosure of their permitted uses. This is the real exposure. A legacy tenant whose use clause reads “general retail” can pivot into your category tomorrow and your exclusive cannot touch them. What is on their shelves today tells you nothing; what is in their lease tells you everything.
• Carve-outs attach to tenants, not to units. When that tenant leaves, the exemption should leave with them — not sit on the unit forever.
• Renewals versus expansions. Expect to lose the argument that a renewal is a new lease. Fight instead for the rule that any expansion of use or premises is caught.

Question 4: what happens the morning it is broken?

A clause with no stated consequence is an invitation to litigate — which for most independent retailers means the remedy costs more than the injury. What you want is a self-executing ladder: consequences that arrive on their own, without a judge, so that the landlord’s incentive to fix the problem is financial and immediate.

Reading that ladder from the tenant’s side

Notice and cure gives the landlord a defined, finite window to deal with the offending tenant — not an open-ended one.
Abatement is the step that matters most: base rent drops by an agreed percentage automatically once the cure period lapses. It converts your problem into the landlord’s problem without a courtroom.
Percentage rent only is the elegant version — during the breach you pay a share of actual sales and nothing else, so whatever the competitor takes from you comes straight out of the landlord’s cheque. Interests re-align within one rent cycle.
Injunctive relief should be expressly contemplated, with an acknowledgement that damages are inadequate — that acknowledgement is not binding on a court, but it makes the application meaningfully easier to run.
Termination is the backstop: if the breach persists past an agreed period, you leave with no residual liability for the balance of the term.

You will not get all five. The percentages and periods are all negotiable. Getting zero of them, however, is a decision — usually one made by not asking.

The overlay that changed in December 2024

Exclusivity used to be purely a contract conversation. It is not anymore.

Under section 90.1(1.01) of the Competition Act, the Tribunal may make an order where it finds that a significant purpose of an agreement is to prevent or lessen competition in a market — even if none of the parties are competitors. A landlord and its tenant are not competitors, which is precisely why the amendment matters here. It came from Bill C-56 (royal assent December 15, 2023), whose section 8 took effect one year later, on December 15, 2024; the same package repealed the efficiencies exception formerly at subsections 90.1(4) to (6). The old defence — “this exclusive was necessary to land the anchor, and the centre is better for it” — no longer has a statutory home.

Three more facts worth carrying: under s. 90.1(9.1), an application is barred only once the agreement has been terminated for more than three years, so deleting a clause does not close the file immediately. Under s. 90.1(1.3), administrative monetary penalties run to the greater of $10,000,000 ($15,000,000 for a subsequent order) and three times the value of the benefit derived — or, where that value cannot reasonably be determined, 3% of annual worldwide gross revenues. And since June 20, 2025 (Bill C-59 received royal assent June 20, 2024 and came into force one year later), private parties may seek leave to bring their own section 90.1 applications.

These are landlord-scale exposures, not tenant-scale ones. But the practical consequence lands on you: the wider and longer the exclusive you extract, the likelier it is to be unjustifiable — and an unjustifiable clause is one that fails on the day you finally need it.

How the Bureau measures justification: scope, duration, geography

According to the Competition Bureau’s guidance Competitor property controls and the Competition Act (2025), the Bureau weighs three dimensions: timeframe — a control should last only as long as necessary to protect incentives for entry or investment, and longer terms are harder to justify; geographic area — it should cover the smallest area necessary, and exclusivity spanning multiple properties owned by the same lessor is generally not justified; and products and services — the restriction should not reach further than necessary. The Bureau’s stated position is that exclusivity clauses are justified only in limited circumstances, such as where they go no further than needed to encourage new entry or let a tenant make investments, and that restrictive covenants are not justified outside exceptional circumstances.

Invert those three dimensions and you have a negotiating script that is also a compliance argument: my category, this centre, the length of my fit-out payback. A landlord’s counsel will find that far easier to sign than an open-ended block on everything vaguely similar across every property they own — which means the disciplined ask is often the one that actually gets granted.

What you can realistically get

Exclusivity strength is a function of leverage, and it is worth being honest about that. A large-format tenant on a long term with strong covenant and real draw can get a defined category, centre-wide reach, successor language and an automatic abatement. An 800-square-foot independent on a three-year term with no covenant will typically be offered a category noun and a promise of “commercially reasonable efforts.”

That does not mean there is nothing to negotiate — it means you should spend a small budget where it converts. If you can win one point, win the definition (threshold drafting). If you can win two, add automatic abatement. Those two decide whether the clause is a tool or a comfort.

And have a commercial leasing lawyer read this clause word by word before you sign. Measured against five years of rent and a fit-out you cannot move, it is the cheapest line item in the deal.

Arthur Zhao

Real Estate Broker · FRI · ABR · SRS · PSA · MCNE · E-PRO · CLHMS & GUILD Elite · REAIS

VP & Branch Manager, Bay Street Group Inc.

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