Exclusivity clause in retail lease: How to protect your store

If you run a bakery, a pharmacy or a gym in a Melbourne shopping centre, the last thing you want is another business just like yours opening two doors down. An exclusivity clause in your retail lease is the only way to stop it happening. It is a promise from the landlord that they will not lease space to a direct competitor while you are a tenant.

What an exclusivity clause actually does

An exclusivity clause is a restriction on the landlord. It says the landlord cannot grant a lease to any other tenant whose business would compete with yours. The restriction usually covers:

• the same type of goods or services (e.g., coffee, footwear, optical);
• a defined trading area (the whole centre, a single level, or a specific precinct);
• a set period (your lease term plus any options).

Without the clause, the landlord can lease to anyone. Even if you are the first juice bar in the centre, the landlord can sign up a second one next month. Once the lease is signed, the Retail Leases Act 2003 (Vic) does not give you any right to stop it.

When you need one

Exclusivity is most important for:

• specialist retailers (bridal, pet food, hearing aids);
• businesses with high customer loyalty (coffee, fitness, beauty);
• tenants who have invested in fit-out, branding or training that a competitor could copy.

If you sell a common product—say, stationery or phone accessories—an exclusivity clause may be harder to get. Landlords prefer to keep their options open for future leasing campaigns.

How to negotiate the clause

Define the scope

Start with a clear description of your business. Instead of “café”, use “specialty coffee and loose-leaf tea retailer with on-site brewing and seating for 30 patrons”. The narrower the definition, the easier it is to enforce. If the definition is too broad, the landlord may refuse or water it down later.

Set the trading area

Ask for the whole centre. If the landlord pushes back, agree to a single level or a defined precinct (e.g., the food court or the fashion mall). Avoid vague terms like “adjacent tenancies” or “within 50 metres”. The Retail Leases Act requires the lease to include a plan, so the area must be measurable.

Include enforcement rights

A clause without consequences is unenforceable. Ask for:

• a right to terminate if the landlord breaches the clause;
• a right to claim damages or a rent abatement;
• a requirement that the landlord must use reasonable endeavours to stop a competitor opening (e.g., by refusing consent to an assignment or sublease).

If the landlord will not agree to termination, ask for a rent-free period or a cash payment equal to three months’ rent as liquidated damages.

Watch for loopholes

Common landlord carve-outs include:

• department stores and mini-majors (they usually have their own exclusivity);
• online sales from other tenants (the landlord may say they cannot control what a tenant sells online);
• pop-ups, kiosks and temporary leases (these can undercut your exclusivity).

Ask your solicitor to review the wording. Elite Retail Leasing provides commercial leasing consultancy, not legal services, so we always recommend independent legal advice before you sign.

How to enforce the clause

Monitor the centre

Walk the centre every month. Note any new signage, fit-out works or marketing that looks like a competitor. If you see something, ask the centre management for a copy of the new tenant’s lease. Under the Retail Leases Act, you can request a disclosure statement for any new lease in the centre.

Act quickly

If a competitor opens, write to the landlord immediately. Set out the facts, quote the clause, and demand the landlord take action within 14 days. Keep a copy of the letter and send it by email and registered post. Delay can weaken your position.

Escalate if needed

If the landlord does nothing, you have two options:

• Apply to VCAT for an injunction to stop the competitor trading. You will need evidence that the competitor is breaching your exclusivity and that you will suffer loss.
• Terminate your lease if the clause gives you that right. Again, get advice from your solicitor before you act.

VCAT can award compensation, but the process can take months. Prevention—through a tight clause and early monitoring—is always cheaper.

What to do if the landlord refuses

If the landlord says no, ask why. Common reasons are:

• the centre is too small to support exclusivity;
• the landlord wants flexibility for future leasing;
• the anchor tenant already has a similar clause.

If the reason is size, ask for a smaller trading area or a shorter exclusivity period. If the reason is flexibility, offer to pay a higher rent or a one-off exclusivity fee. If the anchor tenant has a similar clause, ask to see it—sometimes the anchor’s definition is narrower than you think.

If the landlord still refuses, consider whether the site is right for you. A centre without exclusivity may become overcrowded with competitors, making it harder to trade profitably.

Frequently asked questions

Talk to a Melbourne retail leasing consultant

Elite Retail Leasing acts for retail tenants across Australia on new sites, renewals, lease negotiations, surrenders and expansion planning. If any of the above applies to your business, get in touch.

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