When negotiating a lease for commercial space, landlords will often utilize a relocation provision. In such a provision, the tenant will be subject to, at the discretion of the landlord, being relocated to another space in the same building, or sometimes a different building. Such a provision can be costly and extremely burdensome on the tenant’s business and corresponding profits. Depending on the size of the space being leased, landlords may be willing to delete the provision from the Lease Agreement altogether. However, if the landlord insists on the provision remaining, there are some ways to negotiate the provision to minimize the effect on the tenant.
Cost of the Relocation. If a landlord is going to require a business to uproot its location, this can be extremely costly. Such costs include moving expenses, utility changes, telecommunications logistics costs, and new letterhead and promotional materials. It is commonplace to require the landlord to bear all of the reasonable expenses of the move. However, the tenant will need to draft this provision with a level of particularity such that all costs are considered and covered by the landlord.
Size and Location of the Relocated Space. A prudent tenant will want to negotiate parameters as to the size and location of the relocated space. It is reasonable to insist that the new space top be similar in size to the old space. Such a provision could require that the new space be the same square footage or greater. However, the tenant will want to be clear that, even if the relocated space is larger than the original space, the tenant will not be responsible for a corresponding increase in rent. Additionally, location of the new space is crucial. The tenant will need to be clear in the relocation language that the landlord cannot relocate the tenant to the basement, near a deli, or in any other undesirable location. Some tenants may wish to remain on a similar level of the building, if not the same level, as the old space. It is reasonable to attempt to negotiate certain levels of the building in which the tenant may be located.
Timing of the Relocation. The tenant will want to negotiate a reasonable timeframe for the relocated space. If a landlord wishes to exercise the relocation provision, it will want the tenant to vacate as soon as reasonably practicable. As such, the landlord will likely seek to relocate the tenant in the minimum time period allowed in the relocation provision. Therefore, the tenant should negotiate a timeframe that will allow it to move in a careful and deliberate manner. Also, the tenant may want to negotiate a provision that prohibits a relocation in the final months of the term of the lease.
Location of the Relocation. The tenant needs to be particularly careful to notice where the landlord can relocate the tenant. Although it is typical for the relocation provision to relocate the tenant to a different section of the building, landlords will sometimes seek to expand the relocation to another building owned by the landlord, even if that building is miles away from the original space. As such, the tenant should be careful to make sure it can only be relocated to a definite building.
Although a relocation can be costly and inconvenient, the tenant can minimize the expense and burden of the relocation by specifically defining all of the possible parameters of the relocation provision. If the tenant is careful in its negotiations of the relocation provision, it can greatly minimize any inconvenience and, more importantly, any surprises of a potential relocation.