Written by: Jesse Zelisko

In commercial leasing, tenants take great care and effort to select business space that is suitable for their needs. However, a common provision in modern leases, especially in the context of shopping centres, is the “relocation clause”. This is a clause that allows landlords to move a tenant to a different location, in certain circumstances that the landlord and tenant have agreed to under the lease. While it may be difficult if not impossible for a tenant to avoid a relocation clause in their lease, these clauses can usually be negotiated to protect the interests of a tenant. Below are some considerations a tenant ought to make when negotiating a relocation clause. 

Cost of Relocation 

Ideally, tenants should negotiate for a “turn-key premises”, that is a location that is finished by the landlord prior to relocation, so that all the tenant needs to do is “turn the key” and move in to resume operations. Where such a term cannot be negotiated, relocation can be inconvenient and expensive, considering factors such as moving expenses, business downtime, and renovations to the new location.  

If a “turn-key premises” cannot be provided in a lease, tenants should seek a term ensuring the landlord shall pay for the cost of relocation should it occur. Negotiated costs should be as precise as possible under the lease, covering small costs, like changing business cards or a website, and larger costs, like improvements and renovations to the new space. Tenants should also be mindful of incidental costs like moving expenses and loss of business during downtime when negotiating.  

Substitute Property 

Tenants should be sure to consider factors like specific dimensions, location, visibility, and state of a new location under a relocation clause. Such a term is important for tenants with specific space requirements, take for example a tenant requiring minimum floor space to properly merchandise products, or place and operate equipment. This may also be an important consideration for a tenant requiring close proximity to a major traffic artery, like one that does a lot of shipping. If possible, it is also prudent for a tenant to negotiate a requirement for a landlord to provide it with options to choose between if relocated, all of which complying with any specific standards negotiated for.  

Time Periods 

Relocation clauses will typically set out the minimum number of days necessary for a landlord to provide a tenant with to effect relocation. Tenants will want to negotiate the longest notice period possible to provide it with maximum flexibility to anticipate the effects of relocation on its business and plan accordingly. In addition to length of time, tenants also need to consider specific periods when relocation could negatively impact its business were it to occur. For example, consider a retail business being relocated during the holiday season, when it typically makes the majority of its annual sales. In a circumstance like that, such a tenant would need a term ensuring relocation is prohibited before and during the holiday season. 

If you have any questions about commercial leases, the experienced Real Estate team at Parlee McLaws LLP is always here to help.