Uprooted: Office Landlords' Relocation Rights

By Jason Stagman, CCIM   Stagman Commercial Real Estate Advisors-ITRA Global

561-376-5100  [email protected]

In many commercial real estate leases, landlords have a clause that permits them to relocate the tenant. The landlord may exercise this clause to help a larger adjacent tenant expand their space, help a new prospective tenant aggregate space if it is contiguous to a vacant space, or some other strategic reason (that does not help you). This one is a zinger – especially when it is the specific premises that drives the initial lease for the subject tenant. Also, it is amazing how many tenants neither strike nor modify this clause when they lease space unrepresented – or especially when they are represented by legal counsel and/or a broker. Many commercial brokers will just try to condition this landlord right based on timing and related cost reimbursement, but I try to add conditions where even if the space is larger, the tenant will not pay more money per month in the current term – or renewal terms – plus I try to add many more conditions to make it as difficult and costly as possible for the landlord to displace tenants.

The first line of defense is to try to strike the clause completely.  If the landlord will not strike this clause, one way to condition it is to specify that exterior and interior window line as well as floor height and views are to be equal or superior to the relinquished space. Sometimes if the office space is on a corner of the building or features a double-door entrance, or upgraded finishes such as millwork, crown molding or chair rails – replacement of that is conditioned also.  If there is a built-in secretarial desk or any other fixtures that would be eliminated with relocation, one should account for those as well.  Don’t forget costs for installation of telecom and data lines and the standards of furniture & equipment relocation, as well as the reprinting of all materials that feature the address. Additionally, it is good to limit the amount of times that a landlord may exercise this right during the entire tenancy – not just the initial term.  Finally, try to prevent them from having the right to relocate you within the final 1-2 years of the lease term.

All this is moot, though, if you achieve the primary goal of striking the provision entirely. Go for it; however, Landlords may be averse to striking this clause because they want to keep their options open. This is so especially when they have had past experiences losing great prospective tenants or expansions because existing tenants with smaller spaces obstructed their efforts.  A landlord potentially has a lot to lose by not having this right to exercise; however, that is not your problem as a tenant.  It’s theirs. If you do not want to relocate, I believe that a landlord should not have that right – so fight it.  Make it so costly and so difficult for them to relocate you, that if they really want you to relocate badly enough and do not have standing to do so – they may just make a sweetheart proposal to you that you never imagined was possible.