Legal insight and perspective from the Steinbergs Team
Published: June 4, 2024
Category: Real Estate
In my last post, I discussed demolition clauses, which permit landlords to terminate a lease early for the purposes of renovating or redeveloping their properties. In some cases, however, a landlord that requires the leased space will want to move the tenant to another unit on the property rather than simply terminate the lease. In such cases, the landlord may rely on what is known as a relocation clause, namely a provision in the lease that permits the landlord to move the tenant under certain circumstances.
Relocation clauses are common where the property in question is a multi-unit commercial property like a shopping mall or office building. The owner of such a property may want to relocate the tenant in order to renovate the premises or to accommodate another tenant that needs to expand into a larger space.
Much like in respect of demolition clauses, landlords will typically want the relocation clause to be drafted as broadly as possible to provide for maximum flexibility. For tenants, however, having to move mid-lease can obviously be disruptive and costly. Tenants will thus typically seek to limit the scope of the relocation clause as much as possible if not remove it entirely from the lease.
Ultimately, there are several ways to address concerns regarding the applicability of a relocation clause. First, a tenant may seek to impose conditions on the landlord’s ability to exercise the clause. For example, a relocation clause may allow for a tenant to be moved for the purpose of renovating the space but not to make the space available to another tenant. Second, the relocation clause could provide the tenant with certain assurances in respect of the space to which the tenant is moved. For example, the clause could require that the relocated space be similar in size to the original premises, that it be built out in similar fashion to that of the original premises in respect of things like offices or boardrooms, or that it be located in a convenient space in respect of such things as customer visibility or proximity to specific tenants, parking, or other services.
A relocation clause will also typically address the financial consequences of the tenant’s move. For example, the clause may provide for how rent will be calculated in the event the relocated space differs in size or location from that of the original premises. A tenant may also want to include a maximum rent cap should the new space be larger or situated in a better location than the original premises. Moving costs and other expenses attributable to a move may also be addressed in a relocation clause. And, finally, a tenant may want to include the right to refuse a proposed relocation.
Ultimately, much like other clauses found in a commercial lease, the specific provisions found in a relocation clause will depend on the particular characteristics of the commercial property and the interests of the landlord and tenant in approaching the negotiations in respect of the lease.
