Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Commercial Leasing Law & StrategyLJN NewslettersNewsSections

Location, Location and Location (But Relocation?)

By Myles Hannan
September 22, 2003

Given the age-old maxim of retailers that what matters is 'Location, Location and Location,' it is often difficult for an in-line retail tenant to confront the fact that its landlord can require it to relocate its store to other space in a mall or shopping center. On the other hand, owners of malls and shopping centers must retain the right to expand, to add new anchors and to remerchandise their properties from time to time ' thus, the 'Relocation' provision found in virtually all forms of in-line retail leases. This article explores the major issues that a relocation provision creates for a retail tenant and how some of those issues might be addressed in the lease.

It will serve to sharpen our focus to look first at a relocation provision taken from the form of lease used by the owner of a large regional mall, which is not an atypical provision. It states in pertinent part:

Landlord has the absolute right in its sole and unfettered discretion to relocate Tenant to another space in the Shopping Center. Landlord shall provide Tenant with not less than sixty (60) days written notice (the 'Relocation Period') of relocation specifying a date (the 'Relocation Date') upon which the relocation is to take place. During the Relocation Period, Landlord shall offer Tenant such alternative locations as may be available. In the event the parties agree on a specific location (the 'Relocation Premises'), then this Lease shall be amended to reflect the new location, square footage and rent. In the event Landlord and Tenant are unable to agree on the Relocation Premises during the Relocation Period, this Lease shall automatically terminate on the Relocation Date.

The clause goes on to provide that, if there is agreement as to the relocation space, rent will abate during a 60-day build-out period for the new space and the landlord will pay tenant the unamortized value of its improvements to the original premises. All very straightforward and to the point, is it not? Not exactly. Presented with such a provision, the retailer's concerns are myriad. For example:

  • Will I have the same proximity to an anchor store as I now do?
  • Will the traffic flows be as good as I now enjoy?
  • Will the relocation space be large enough for my optimum merchandising layout?
  • What will be the cost to me of the relocation and how will it affect the timing of my projected cash flows?
  • Is my remaining term long enough to fully amortize the new furnishings, fixtures and equipment that the move will necessitate?
  • What if the 'down time' during the move is longer than expected and adversely affects my store's profitability?
  • What happens if I cannot see my way clear to relocate, and what are the financial consequences if I just refuse to do so?

So, what is a tenant to do?

This premium content is locked for Commercial Leasing Law & Strategy subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
The DOJ's Corporate Enforcement Policy: One Year Later Image

The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.

The DOJ's New Parameters for Evaluating Corporate Compliance Programs Image

The parameters set forth in the DOJ's memorandum have implications not only for the government's evaluation of compliance programs in the context of criminal charging decisions, but also for how defense counsel structure their conference-room advocacy seeking declinations or lesser sanctions in both criminal and civil investigations.

Use of Deferred Prosecution Agreements In White Collar Investigations Image

This article discusses the practical and policy reasons for the use of DPAs and NPAs in white-collar criminal investigations, and considers the NDAA's new reporting provision and its relationship with other efforts to enhance transparency in DOJ decision-making.

Bankruptcy Sales: Finding a Diamond In the Rough Image

There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.

Compliance Officers: Recent Regulatory Guidance and Enforcement Actions and Mitigating the Risk of Personal Liability Image

This article explores legal developments over the past year that may impact compliance officer personal liability.