What is arguably the worse provision you could imagine in a commercial lease from a tenant’s point of view? Many landlords probably want it in their leases. It is the relocation provision where the landlord at its sole discretion may require a tenant to move to another location. The smaller the square footage a tenant wants to lease, the more likely the landlord will insist a relocation provision be in the lease. A tenant with a smaller lease space may not have leverage to negotiate the removal of the relocation provision; however, a tenant should determine if conditions can be in the relocation provision to lighten the load if the tenant must move.
For the sake of discussion, let’s assume there are business reasons the tenant must live with the relocation provision. Some aggravation a tenant will face include the disconnection and reconnection of computers, audio, video and telephone systems, loss of income during the move, the build out of the new space, losing built-in cabinets and work surfaces or the removal and reinstallation of those built ins, and damage to tenant’s personal property during the move.
What could a tenant do to lessen the impact of a move? Below, while not an exhaustive list, are examples of conditions a tenant may want to include in the relocation provision.
- Tenant has the option to terminate the lease if landlord invokes the relocation provision
- Tenant to have at least 90 days to surrender possession of the lease space if tenant elects to terminate the lease or to move to another location in landlord’s building
- State a process both tenant and landlord must follow to honor the relocation provision
- Include a “drop dead date” for 100% completion of relocation and define what completion will look like
- State an exact sum to be paid by landlord to tenant to cover the expenses associated with the move, when the funds will be transferred to tenant, and whether an escrow will be used so tenant knows funds are available to reimburse tenant
Finally, remember Murphy’s Law has not been repealed. No matter how much effort regarding time, expertise and money (whether you are the tenant or landlord) you think it will take to complete a relocation, there is a high probability it will take more skill, more time and more money to move than was estimated.
This is the fifth article in a series of articles on elements of a commercial lease. The first article was on utilities. The second article discussed sales tax. The third article was on notices. The fourth article discussed the importance of access.