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Structuring a Comprehensive Relocation Provision
Relocation is one of those issues that often gets little attention at the time a letter of intent to lease is being negotiated and commonly surfaces when the initial lease draft is circulated. In a lease for premises in a multi-tenant project, the typical relocation provision offered by the landlord in its first draft will provide broad rights for the landlord to relocate the tenant coupled with narrow landlord liability for expenses. The landlord is frequently driven by its need to retain flexibility in leasing the property. During negotiations, the landlord will try to convince the tenant that it will not use the relocation right in a way that is detrimental to the tenant's ability to conduct its business. Unless the location of the premises is so critical that any right of relocation would be a deal breaker for the tenant, the tenant's typical response will be to seek to reduce the likelihood that the landlord will exercise its relocation right and to protect itself from expenses related to a forced relocation. In most circumstances, the tenant will seek to include as many direct and indirect expenses as possible in a list of items that will be reimbursed by the landlord in the event of a forced relocation. In some instances, a tenant may also request a fixed amount of compensation or rent abatement if it is relocated. The tenant's approach is often to make relocation very costly to the landlord in order to discourage a relocation.
When parties are negotiating a lease in a project that is slated for redevelopment or repositioning, the probability that a relocation will occur at some time during the term of the lease is enhanced. Ideally, the parties will include a comprehensive relocation provision in their lease. At a minimum, a comprehensive relocation provision should include: i) a description of the landlord's right to relocate the tenant, ii) the timing of the relocation, iii) a set of conditions under which the tenant will be required to relocate and which will apply after a relocation is completed and iv) the procedure for the physical relocation. This article will discuss these issues and provide an example of one approach to drafting a balanced relocation provision.
Right To Relocate. In order to describe the landlord's right to relocate the tenant, the parties will need to reach an agreement regarding the landlord's need for this right. If the need is tied to a redevelopment project, the landlord's right to relocate the tenant may be limited to the planned time period for the renovation ' or the landlord's right may be extinguished if it is not exercised before the completion of the redevelopment. In addition, if the parties are able to agree during the negotiations to one or more acceptable locations for any relocation, the landlord's right to relocate may be limited to those locations. This section should address the landlord's reasonably anticipated need to relocate the tenant, enable the tenant to understand and plan for those scenarios where it may be required to relocate, and give the tenant confidence regarding those instances when it will clearly not be required to relocate.
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