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<b><i>In the Spotlight:</i></b> Relocation Clauses
Many landlords are faced with a dilemma when signing a deal with a small tenant. What if a larger tenant wants to lease a large block of space and a smaller tenant is already leasing some of the space that the larger tenant needs? To cover this situation, many landlords require a relocation provision to be inserted into the leases it enters into with small tenants, which permits the landlord to relocate the smaller tenant to another portion of the shopping center.
On the flip side, moving a tenant to another location within the shopping center can have serious consequences for the tenant being relocated. For example, relocating a tenant into new space that is in a “dead” zone in the center can result in a huge loss in sales volume for that tenant. Seeking a proper balance between the legitimate needs of a landlord and the legitimate needs of a small tenant should be the goal of the parties who are reviewing a relocation provision.
A sample relocation provision is as follows:
Landlord reserves and is hereby granted the right, upon 90 days' prior written notice to Tenant (the Relocation Notice”), to relocate Tenant and to substitute other premises within the Shopping Center for the premises originally leased hereunder (“Substitute Premises”) as though originally leased to Tenant as of the Effective Date, provided, however, the Substitute Premises shall not contain an area that is greater than 10% greater or less than the square footage contained in the original Premises. In the event of such relocation, all rent under this Lease will be adjusted in accordance with the floor area of the Substitute Premises, provided, however, in no event shall the rent exceed the amount per square foot due to the original Premises. Landlord agrees to pay the expenses reasonably incurred by Tenant incidental to relocating to the Substitute Premises, including the reasonable, out-of-pocket costs of moving Tenant's equipment and inventory from the Premises to the Substitute Premises. Provided Tenant submits to Landlord, within 30 days after Tenant's receipt of Landlord's Relocation Notice, plans and specifications for the decorations and improvements for the Substitute Premises, Landlord agrees to furnish the Substitute Premises with decoration and improvements substantially similar to those in the original Premises. Landlord will have the right to reuse the decorations and improvements used in the original Premises. Tenant will open for business in the Substitute Premises and will surrender the original Premises to Landlord on the date of delivery of the Substitute Premises to Tenant.”
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