What is the Permitted Use Clause in a Lease Agreement?

The term “permitted use” is a fundamental concept in retail and commercial lease agreements that defines the authorised scope of activities for the leased premises.

The term ‘permitted use’ refers to what a tenant can and cannot do on a leased property. When leasing a property for commercial or business purposes, a tenant has an affirmative duty to fully disclose all intended activities to be conducted on the premises, including products and/or services being sold on the premises.

All of this must abide with what is written in the permitted use clause of the lease agreement by the landlord. This clause is written in conjunction with state and territory specific zoning laws and regulations that may dictate what activity can be conducted from the premises.

Operating outside the scope of the permitted use clause constitutes a breach of the lease agreement, which may entitle the landlord to remedies including lease termination and/or claims for damages against the tenant.

What Can be Included in Permitted Use Clauses

The following provisions represent standard examples of permitted use clauses:

This property will be used for:

• “Operation of a café and sale of baked goods, coffees and light meals.”
• “Licensed restaurant and takeaway food service.”
• “Office for professional accounting services.”
• “Personal training sessions and exchange of health advice.”

A breach of the permitted use clause encompasses activities beyond illegal conduct and includes any unauthorised deviation from the specifically permitted uses. If your business expands to anything beyond what is directly stated in the permitted use clause, then you will need to negotiate with the landlord. Even the small things, like expanding to serve cooked meals at a café or adding new machines to a personal training business, can be considered a breach if not spoken about to the landlord beforehand due to potential property risks, insurance implications, and other material considerations.

If you have any questions about permitted use in your property matter, please do not hesitate to contact me. I am here to help.

DISCLAIMER: This article is for informational purposes only and does not constitute legal advice.