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Real Estate Law | December 2014

Hell, No, We Won't Go: Say "No" to Relocation Provisions in Your Commercial Lease

A relocation clause in your commercial lease can quickly turn your successful business into a failure.

You might find it ‘way back in the lease - maybe Article 31 on page 38. It is the “Relocation“ provision. It gives the landlord the right to move you. And it can bankrupt you.

On the surface, relocation provisions sound and look reasonable. They will provide something like:

Landlord may, at any time during the term of the Lease, elect to relocate Tenant to other premises within the Shopping Center so long as the Substitute Premises contain substantially the same square footage as the original Premises. Tenant shall vacate the Premises and thereafter treat the Substitute Premises as the Premises for purposes of this Lease. Tenant shall not be entitled to any compensation for the relocation; however, all expenses associated therewith shall be solely borne and aid by the Landlord.

In many cases, language will be included to explain how such ability to move you is necessary for the Landlord to properly protect its interests and manage the space (that is, to consolidate or combine its spaces to attract and satisfy new tenants’ needs). It certainly sounds reasonable enough, and you can’t beat a Landlord who will pay all the expenses.

But consider this: You are a Tenant in a “power center,” and life and business are good. They are good in large part because your little sandwich shop is located near the main entrance and is one of only a couple of small merchants between Home Depot and Safeway. The foot traffic between those two stores brings hundreds of people past your door every day, and enough of them want sandwiches that you can send your kids to college if they improve their grades.

Then the letter comes. The Landlord has decided he needs to combine your space with the adjacent space to make room for a new tenant. There is, however, “comparable” space for you at the south end of the center (you know, next to the dry cleaner). You can see where this is going: You will be out of business in six weeks (but still on the hook for the lease).

Just Say "No"

Is there nothing you can do? Not after you have signed the lease. But there is at the outset: Just say “no” to the relocation clause. When the Landlord tells you it’s important to him, explain that it is more important to you. When he says there is only a very small chance it could ever happen, tell him that means he shouldn’t mind deleting it. And if he tells you it’s a deal breaker, break the deal.

I have seen it happen. Don’t let it happen to you.