Commercial leases have become more complicated over the last few years, due to increased financial regulations and complex ownership structures. My partner Will Sale and I will cover a number of issues related to this going forward, but first up on our “Must Do” list is having a clear understanding of the relocation clause. The clauses are contained in every lease, but they’re often overlooked due to “lease negotiation exhaustion.”
The relocation clause essentially gives the landlord the right to relocate a tenant at their discretion, should the landlord have another tenant—likely a larger one—that needs the space. As with many issues in a lease, a larger tenant will have a stronger negotiation position. Still, they’d be hard pressed to have the clause completely removed, unless the relocation privilege right becomes financially unfeasible for the landlord.
In our work as tenant representatives, we have negotiated the majority of all types of modifications, all the way to having the clause removed for our clients. This is another reason we ask our clients to be patient during negotiations; even if the landlord absorbs all the associated costs, there is an aggregation and uncertainty factor to be considered.
Here are a few factors that should be made part of the relocation clause, short of having it removed entirely:
• Ask the landlord to give ample notice—a minimum of three months to six months
• The landlord should pay for update of all addresses, website, telephone relocation, letterhead and business cards, and moving of all FFE at a convenient time for the tenant.
• Landlord must replace door signage and finish out new space of equal or better quality than the tenant’s current space.
There are many other negation factors to consider, but if the relocation clause is negotiated properly, it can be a win for all parties involved. It’s also just one more reason why tenants should look for landlords that have the financial ability to carry out their obligations should a relocation be required.