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In the Spotlight: Negotiating Relocation Provisions
Relocation provisions, particularly in retail leases, often spark heated negotiations between the parties. The landlord wants to preserve flexibility to reconfigure its shopping center and/or accommodate the needs of prospective tenants. Relocating can cause uncertainty, disruption and significant hardship for tenants, especially for retail business tenants that highly value location and visibility.
Most relocation provisions, particularly those that have been adapted from form office leases, address size, configuration and monetary issues. For example, even if the relocation premises are larger than the original premises, the tenant will typically not be obligated to pay any additional rent or common charges. Relocation provisions will usually also limit the location of the relocated premises. In an office lease for example, the lease provisions may limit the relocated premises to certain floors of the building depending on the location of the original premises. In a shopping center, an exhibit is typically attached to the lease containing a cross-hatched area where the relocation may occur (or conversely where it may not occur). Savvy retail tenants will want to provide an additional layer of protection, ie, specific language which provides that the exterior appearance of the tenant's relocated premises will remain substantially the same as the original premises with respect to visibility, signage, logo placement, etc. In the absence of such additional protection, a tenant may find itself in a relocated premises that is substantially the same as the original premises with respect to size and internal configuration and located within an area prescribed in the lease, but has an exterior appearance not commensurate with the tenant's original premises. Of course, if a tenant has the leverage to insist on such additional protection, it may also have the leverage to avoid the insertion of a relocation provision in the lease, which from the tenant's point of view, is a better negotiation result.
William Crowe
Relocation provisions, particularly in retail leases, often spark heated negotiations between the parties. The landlord wants to preserve flexibility to reconfigure its shopping center and/or accommodate the needs of prospective tenants. Relocating can cause uncertainty, disruption and significant hardship for tenants, especially for retail business tenants that highly value location and visibility.
Most relocation provisions, particularly those that have been adapted from form office leases, address size, configuration and monetary issues. For example, even if the relocation premises are larger than the original premises, the tenant will typically not be obligated to pay any additional rent or common charges. Relocation provisions will usually also limit the location of the relocated premises. In an office lease for example, the lease provisions may limit the relocated premises to certain floors of the building depending on the location of the original premises. In a shopping center, an exhibit is typically attached to the lease containing a cross-hatched area where the relocation may occur (or conversely where it may not occur). Savvy retail tenants will want to provide an additional layer of protection, ie, specific language which provides that the exterior appearance of the tenant's relocated premises will remain substantially the same as the original premises with respect to visibility, signage, logo placement, etc. In the absence of such additional protection, a tenant may find itself in a relocated premises that is substantially the same as the original premises with respect to size and internal configuration and located within an area prescribed in the lease, but has an exterior appearance not commensurate with the tenant's original premises. Of course, if a tenant has the leverage to insist on such additional protection, it may also have the leverage to avoid the insertion of a relocation provision in the lease, which from the tenant's point of view, is a better negotiation result.
William Crowe
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