Real Estate Law | December 2014
Hell, No, We Won't Go: Say "No" to
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
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