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In the Spotlight: Tenant Issues in Relocation Clauses

BY Ira Fierstein
August 29, 2011

Virtually every office landlord includes a relocation clause in its form lease, primarily to provide the landlord with flexibility to expand larger tenants into adjacent space or connecting floors, or to avoid creating unleaseable areas between two tenants. While these are reasonable concerns for the landlord, possible relocation raises significant issues and concerns for the tenant as well. This calls for careful consultation with the tenant's attorney and tight drafting to lessen the cost and inconvenience to the relocated tenant, should the landlord exercise its rights to do so.

Timing

A tenant should negotiate for a long lead time to prepare for the relocation. While a landlord may offer 30 or 60 days, a tenant should insist on at least 90 days' notice before having to move. This gives the tenant time to arrange for necessary cable, telephone and satellite hookups, and time to notify customers and clients of the move. On the flipside of this issue, the request to substitute premises should not be allowed at all during the last 18 months or so of the lease term. The rationale is that there is only a short time remaining in the lease, and it would be extremely unfair and inconvenient to force the tenant to move and operate in the new location for a little over a year and then possibly have to move again. Most landlords will not resist this position, as they will not want to incur the expense of the move or the tenant improvement costs. The relocation should also not be allowed unless the landlord intends to use the tenant's space for a full-floor tenant, or for a tenant that will occupy at least 50% more space than the original tenant is occupying.

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