Get a Five Year Exclusive Use That Holds Up in GTA Industrial Leases

Exclusive use clauses can still be used in Canadian industrial leases, but they must be narrowly tailored and documented to pass the Competition Bureau’s heightened scrutiny under section 90.1 of the Competition Act. The immediate practical step for both landlords and tenants is to limit duration, product scope and geographic reach, and to put the business rationale in writing before the lease is signed.

TL;DR:

• Exclusivity clauses in Canadian industrial leases must be narrowly tailored around product scope, geographic reach, and duration to survive Competition Bureau scrutiny.
• A five-year exclusivity linked to a documented capital investment is more defendable than a blanket, long-term restriction spanning the entire lease or portfolio.
• Drafting strategies include matching exclusivity periods to tenant improvement payback schedules and clearly recording pro-competitive rationale in side letters.
• Both landlords and tenants should retain evidence supporting the necessity and reasonableness of exclusivity terms, such as timing, scope, and investment details.
• Remedies for challenged clauses often involve contingency clauses for scope reduction, rent reduction, or lease termination if an exclusivity agreement is later deemed overly broad.

Table of Contents

• What is an exclusive use clause in an industrial lease?
• How Competition Act amendments and Bureau guidance changed exclusivity rules
• When is exclusivity more likely to hold up?
• Drafting and negotiating exclusivity in GTA industrial leases
• Contingencies, remedies and what happens if a clause is challenged
• Sample exclusivity clause and a drafting checklist
• A practitioner’s view on exclusivity in the GTA industrial market
• How Michael Law and Lennard Commercial support exclusivity negotiations
• Where to read more on exclusivity and property controls
• Sources
• FAQ

What is an exclusive use clause in an industrial lease?

An exclusive use clause is a lease provision that prevents a landlord from leasing other space in the same building, plaza or portfolio to a business that competes with the tenant’s specific activity. In industrial settings, exclusivity usually protects a defined commercial function rather than a whole industry category.

Common forms include:

• Product or service carve-outs, such as protecting a single tenant’s cold storage or 3PL fulfillment operation within a distribution hub.
• Building or unit-level limits, restricting exclusivity to one property rather than a landlord’s entire regional portfolio.
• Use-based restrictions, tied to the tenant’s permitted use clause so exclusivity only applies while the tenant actually operates that business.

Exclusivity provisions do not sit in isolation. They interact directly with permitted use clauses, which define what the tenant can do with the space, and with assignment and subletting provisions, which determine whether a successor tenant inherits the same protection. A poorly coordinated set of clauses can create exclusivity that outlives its original justification, which is precisely the pattern that draws regulatory attention.

How Competition Act amendments and Bureau guidance changed exclusivity rules

Section 90.1 of the Competition Act was expanded effective December 15, 2024, so the Competition Tribunal can now review agreements involving property controls, including exclusive use clauses, even where the landlord and tenant are not competitors. The amendment also removed the prior efficiency exception, which had allowed parties to defend restrictive agreements on the basis that efficiency gains offset any competitive harm.

The Competition Bureau’s finalized guidance on property controls, published in 2025, confirms that these clauses are not presumptively anti-competitive but must be assessed case by case using a set of practical factors. Rather than banning exclusivity outright, the Bureau’s guidance on competitor property controls sets a four-factor framework built around necessity, duration, geographic reach and product scope, with an emphasis on tailoring the clause as narrowly as possible to a genuine pro-competitive rationale.

Both landlords and tenants can be investigated. The Bureau’s guidance makes clear it will typically treat all parties to a property-control agreement as potential subjects of an inquiry, and remedies the Tribunal can order under section 90.1 include prohibiting the conduct or requiring steps to restore competition. Restrictive covenants registered directly on title face even more skepticism than lease-based exclusivity clauses and are rarely upheld outside exceptional circumstances.

When is exclusivity more likely to hold up?

The Bureau’s factors translate into practical thresholds that GTA landlords and tenants can apply while drafting or reviewing a clause.

• Duration: tie the exclusivity period to a defined investment recovery window rather than the full lease term, and avoid multi-decade commitments that outlast any reasonable payback period.
• Geographic scope: protect the smallest area that achieves the commercial goal, such as one unit or building, rather than an entire plaza or the landlord’s full portfolio.
• Product or service scope: word the restriction around the tenant’s actual activity (for example, “refrigerated food storage for third-party logistics clients”) instead of a sweeping category like “all warehousing uses.”
• Necessity: exclusivity is easiest to defend when it demonstrably enabled a specific investment or market entry, such as a tenant committing capital to specialized racking or refrigeration equipment that only makes sense with a protected customer base.

The Bureau has referenced foreign benchmarks as illustrative context rather than binding rules for Canadian leases.

Pro Tip: Draft the exclusivity term to match your tenant improvement payback period, not your base lease term. A five-year exclusivity tied to a documented $400,000 fit-out schedule is far easier to defend than a fifteen-year blanket restriction.

Drafting and negotiating exclusivity in GTA industrial leases

Tenants and landlords in the GTA’s tight industrial market each have leverage points worth using at the negotiation table.

1. Tenants should push for phased exclusivity that narrows over time, paired with a compliance contingency that adjusts rent if the clause is later found unenforceable.
2. Landlords should retain carve-out rights for existing tenants and anchor uses, and consider offering rent or tenant improvement allowance trade-offs in exchange for a shorter exclusivity term.
3. Both parties should document the pro-competitive rationale in a side letter, including tenant improvement budgets, projected investment schedules and any market search showing why exclusivity was necessary to attract the tenant’s capital.
4. Assignment and sublease clauses should specify whether a successor operator inherits exclusivity, since an unrestricted transfer can extend a narrowly justified clause into a much broader one.

Recording contemporaneous evidence matters as much as the clause wording itself. A landlord and tenant who can point to a dated pro forma showing why a five-year, single-unit exclusivity was necessary to justify a tenant’s cold storage build-out are in a materially stronger position than parties relying on boilerplate language with no supporting file.

Contingencies, remedies and what happens if a clause is challenged

Because enforceability now carries real uncertainty, most industrial leases benefit from built-in contingencies rather than relying on the clause standing or falling entirely on its own.

• Compliance contingency: language stating the clause will be narrowed or amended if a regulator or Tribunal finds it overly broad, rather than voiding the entire lease.
• Rent abatement tied to actual harm: a mechanism reducing rent if exclusivity is struck down and a competing use is introduced nearby.
• Termination rights: an option allowing the tenant to exit if exclusivity was a material inducement to sign and is later invalidated.

If the Competition Bureau opens an inquiry or the matter reaches the Tribunal, both parties should retain counsel promptly, preserve all lease negotiation records and TI documentation, and consider negotiating interim measures rather than litigating the clause’s validity in full. Tribunal remedies under section 90.1 can include orders to restore competition, which is a different exposure than a private contract dispute over rent or damages between landlord and tenant.

Sample exclusivity clause and a drafting checklist

A narrowly tailored clause for an industrial tenant might read along these lines: “Landlord shall not lease any other unit within the Building to a tenant whose primary use is third-party refrigerated logistics storage for a period of five years from the Commencement Date, provided Tenant continues to operate such use and maintains its refrigeration and racking investment as described in Schedule C.”

Before finalizing exclusivity language, confirm:

1. Duration matches a documented investment recovery period.
2. Geographic scope is limited to the smallest workable area.
3. Product or service wording reflects the tenant’s actual operation, not a broad category.
4. Investment link is recorded in a schedule or side letter.
5. Assignment treatment specifies whether successors inherit the protection.
6. Rent adjustment or termination contingencies are drafted in case of a challenge.

A cold storage tenant, a 3PL operator and a general warehouse user will each need different product-scope wording, even where the duration and geographic logic stay similar.

A practitioner’s view on exclusivity in the GTA industrial market

In tight submarkets across Mississauga and Vaughan, narrow exclusivity tends to unlock real tenant investment, such as a refrigerated logistics user committing to costly racking in exchange for a five-year, single-building protection. Broad, portfolio-wide exclusivity clauses cause more disputes than they prevent, particularly when a landlord later wants to lease adjacent space to a related but distinct use. My suggestion to negotiators is to trade duration for certainty: a shorter, well-documented exclusivity term closes faster and survives scrutiny better than a long one built on vague language.

— Michael Law

How Michael Law and Lennard Commercial support exclusivity negotiations

Negotiating exclusivity in an industrial lease is easier with a broker who has handled the documentation regulators now expect. Michael Law and Lennard Commercial work with tenants and landlords across the GTA to build the investment schedules, market comparisons and clause language that support a defensible exclusivity provision.

Services relevant to this process include:

• Tenant representation for industrial users negotiating exclusivity, permitted use and assignment terms together.
• Landlord representation for owners structuring exclusivity carve-outs across a multi-tenant industrial property.
• Lease negotiation and documentation support, including the pro-competitive rationale files that help a clause withstand review.

Review the full range of industrial leasing and tenant representation services or connect directly through Michael Law’s profile at Lennard Commercial to start structuring a lease that holds up.

Where to read more on exclusivity and property controls

For further reading, consult the Competition Bureau’s guidance on property controls, the text of section 90.1, and legal commentary on negotiating exclusivity clauses) after the 2024 amendments.

Sources

• Competitor property controls and the Competition Act — Competition Bureau
• Competition Act — section 90.1 (consolidated to 2024-12-15)

FAQ

Is an exclusivity clause enforceable in Canada?

Exclusivity clauses remain enforceable in principle, but since the December 2024 amendments to section 90.1, the Competition Tribunal can review them regardless of whether the landlord and tenant compete. Enforceability now depends on narrow drafting and documented business rationale rather than the clause simply appearing in a signed lease.

Can you provide an example of an exclusivity clause?

A typical industrial example restricts a landlord from leasing other units in the same building to a competing refrigerated logistics operator for a defined period, such as five years, tied to the tenant’s documented equipment investment. The clause usually references a schedule showing the tenant’s capital commitment to support the necessity argument the Competition Bureau’s guidance expects.

What are the different types of commercial leases in Canada?

Canadian commercial and industrial leases are commonly structured as net leases, where the tenant pays base rent plus a share of property taxes, insurance and common area costs, or gross leases, where the landlord bundles most operating costs into one rent figure. Industrial leases in the GTA are most often net leases, with exclusivity and permitted use clauses negotiated as part of the offer to lease stage.

Can you walk away from a commercial lease?

Walking away from a signed commercial lease before its term ends typically exposes the tenant to damages claims unless the lease includes a specific termination right or contingency, such as one tied to a failed exclusivity clause. Reviewing termination mechanics and negotiating exit contingencies before signing is the more reliable way to preserve flexibility than attempting to exit unilaterally later.

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