The Playbook / Clause 17
Relocation of Tenant
Landlord Right to Relocate; Substitute Premises Requirements; Cost Reimbursement; Tenant Termination Right
A relocation provision gives Landlord the right to move Tenant from the original Premises to another location in the Project, typically to accommodate a major redevelopment, an anchor-tenant deal, or a reconfiguration. This is largely a retail and shopping-center issue, though it appears in office leases as well. The provision has four pressure points: when relocation is permitted, the requirements for the substitute Premises (size, location, quality), the timing and cost-reimbursement obligations, and Tenant’s remedies (including termination) if the relocation is unacceptable.
What the landlord’s form is doing
Landlord wants:
- Broad relocation right exercisable in Landlord’s discretion at any time during the Term
- No specific size, quality, or location requirements for substitute Premises beyond "comparable"
- Short notice period (sixty (60) to ninety (90) days)
- No reimbursement of Tenant’s relocation costs, or limited reimbursement (e.g., physical moving costs only)
- No Tenant termination right based on relocation
- Rent unchanged in substitute Premises (or set at landlord’s discretion)
- Tenant accepts substitute Premises "as-is"
- Landlord retains discretion to terminate the Lease as to the original Premises rather than relocate
What tenants should watch for
When the landlord may relocate
When relocation is permitted: narrow scope. Push for relocation triggered only by: (a) major Project redevelopment requiring vacancy of the original Premises (e.g., demolition, structural modification, full re-tenanting of a floor or building); or (b) leasing of contiguous space to an anchor tenant occupying at least [50,000] rentable square feet. Resist broad "Landlord’s discretion" or "tenant mix" rationales.
When relocation is not permitted. Carve out: (i) relocation in the first thirty-six (36) months of the Lease Term (allows Tenant to recoup investment); (ii) relocation during the last [twenty-four (24)] months of the Term (no time to amortize relocation costs); (iii) relocation more than once during the Term; (iv) relocation in connection with a Landlord-initiated redevelopment that does not benefit the Project as a whole.
Notice period. Require at least twelve (12) months’ written notice from Landlord, with Tenant’s acceptance or rejection (and termination right) within sixty (60) days. Avoid sixty (60) or ninety (90)-day notice periods, which are inadequate for any meaningful evaluation.
Substitute premises must exist at notice: condition precedent. Where the relocation clause requires Tenant to vacate and “occupy the Substitute Premises promptly,” courts may read the existence of a ready, available substitute space as a condition precedent to Tenant’s duty to relocate; a landlord that issues a relocation notice for space still under construction cannot enforce the relocation or terminate for Tenant’s refusal. Tenant counsel should nonetheless make the requirement express: the substitute premises must be complete and ready for occupancy on the date of the relocation notice.
The substitute premises
Substitute Premises: requirements. Substitute Premises must meet specific objective requirements: (a) same rentable square footage (within five percent (5%) deviation, with rent adjustment for any deviation); (b) equivalent or better visibility, access, and location within the Project (not basement, service alley, or backside); (c) same Permitted Use compliant with the substitute Premises; (d) tenant-favorable rights (exclusives, signage, branding) preserved or replicated in the substitute Premises; (e) new space delivered with TI completed by Landlord at Landlord’s expense, to substantially equivalent finish and quality as the original Premises; (f) any unfunded TIA carries forward.
Substitute Premises: Tenant approval. Tenant has the right to approve the substitute Premises based on the foregoing requirements. Tenant’s approval shall not be unreasonably withheld; Landlord proposes, Tenant reviews and approves, and the parties memorialize in writing.
Temporary premises: set the terms in advance. If the relocation involves temporary space, fix the terms in the Lease: no Base Rent or Additional Rent during temporary occupancy; scrutinize “as-is” delivery, Landlord’s reserved right to displace Tenant again in favor of a prospective tenant, reimbursement of Landlord’s direct expenses, and per-diem charges for late surrender of the temporary space.
Termination right. Tenant may terminate this Lease if the substitute Premises does not meet the objective requirements set forth herein, or if relocation occurs in the last twenty-four (24) months of the Term, or in Tenant’s reasonable judgment the relocation is materially adverse to Tenant’s business. Notice of termination within sixty (60) days of Landlord’s relocation notice; if termination, Tenant has no obligation to pay further rent.
Rent and relocation costs
Relocation costs: Landlord pays all. Landlord shall pay all reasonable costs of Tenant’s relocation, including: (i) physical moving costs (movers, packing, transportation); (ii) IT/telecom disconnect, transfer, and reconnection; (iii) signage replacement and brand asset replacement; (iv) furniture and equipment moving; (v) employee productivity loss (if any); (vi) marketing and customer-notification costs (especially for retail); (vii) any TI work needed in the substitute Premises beyond what Landlord delivers; (viii) reasonable legal fees incurred by Tenant in connection with the relocation. Landlord deposits an estimated amount in advance, with reconciliation after move.
Indirect costs: resist token caps. Landlord forms cap reimbursement of indirect relocation costs (stationery, business cards, advertising) at a nominal figure (e.g., $500) against paid bills. Insist on full reimbursement of documented indirect costs, including customer notification and rebranding.
Rent: adjustment in substitute Premises. If the substitute Premises is larger than the original, Rent shall not exceed the original Rent (Landlord absorbs any rent premium). If the substitute Premises is smaller, Rent shall be reduced proportionally to the area difference. Rent calculation for the substitute Premises should not exceed comparable market rent for the area, and OpEx and tax pass-through should be calculated on the substitute Premises basis.
Rent abatement during relocation. Rent shall abate from the date Tenant ceases operations at the original Premises until Tenant is open and operating in the substitute Premises (typically thirty (30) to sixty (60) days). Landlord pays for transitional storage if Tenant cannot move directly.
Relocation rent: precedent that rent should not increase. Even landlord-oriented model relocation clauses concede that rent for the new premises should be the prevailing market rate less ten percent (10%), and in no event more than the existing rent, with minimum rent and CAM charges abating in full for any period Tenant cannot conduct business in either space, and with Landlord bearing all moving costs and the cost of permanent improvements so that the new space is substantially the same or better. Use these concessions as the negotiation floor.
Enforcement and negotiation leverage
Refusal to relocate: resist default and forfeiture triggers. Landlord forms make Tenant’s failure to surrender and relocate in accordance with the relocation notice an “immediate and material default” (time being of the essence) entitling Landlord to re-enter and remove persons and property. Resist any default or forfeiture trigger; a bona fide dispute over whether the substitute premises satisfy the lease criteria should be resolved through the dispute-resolution clause, not by eviction. Resist likewise any “Relocation Zone” formulation that leaves the exact location to Landlord’s sole discretion.
Additional levers conceded in landlord-side model clauses. The landlord-oriented model relocation clause itself concedes: a stated minimum square-footage floor for the substitute premises; a mapped “Relocation Zone” attached as a lease exhibit; leasehold improvements “at least reasonably equivalent” to the existing permanent improvements, installed at Landlord’s sole cost; and a negotiated cap on any post-relocation increase in Rent and other area-based charges. Landlord counsel regard sixty (60) days’ notice as their own compromise position, concede that tenants “rightly” demand limits, and acknowledge that large tenants routinely refuse relocation clauses altogether, leverage supporting outright deletion for a substantial tenant. Also negotiate a busy-season blackout on relocation (e.g., November through December for retail; January through April for professional-service tenants).
How this typically gets negotiated
Tenants negotiate to confine relocation rights: limited triggers (genuine redevelopment, an anchor deal), a substitute space that must meet objective comparability requirements, long notice, full cost reimbursement, rent that does not increase, and a termination right if the substitute does not measure up. Landlords resist each limit; unlimited relocation clauses still appear in first drafts.
The specific language that resolves each of these points depends on the deal. Talk to Paul about your lease →
How the states treat it
Majority rule
Commercial relocation provisions are enforced as written. The "comparable" standard is litigated where the parties disagree on adequacy; courts apply a multi-factor reasonableness test focused on size, location, visibility, and impact on tenant’s business. Some courts have applied the implied good-faith covenant to limit arbitrary or pretextual relocations.
Notice and process requirements
Courts strictly enforce notice and timing provisions. A tenant who timely objects to a substitute Premises must preserve that objection in writing; a tenant who accepts and moves typically waives later objections.
Notable cases
Cases on the "comparable" standard are fact-intensive and vary by jurisdiction. Notable authorities include cases interpreting "comparable" in similar contexts (e.g., comparable sales for FMR determination).
Cases on the duty of good faith in landlord exercise of relocation rights: courts increasingly impose a good-faith limit on broad discretionary landlord rights.
Noroton Heights Shopping Ctr., Inc. v. Phil's Grill, LLC, 207 Conn. App. 211, 2021 WL 4024377 (2021). A relocation clause requiring the tenant to “occupy the Substitute Premises promptly” made the existence of a ready substitute space a condition precedent; relocation into space still under construction was unenforceable, and the tenant’s refusal was not a breach.
Game film: real clauses from real leases
Excerpts from commercial leases filed as exhibits with the Securities and Exchange Commission, trimmed for length. Follow the citation for the full document on EDGAR.
“Landlord reserves the right to relocate Tenant during the term of this Lease or any renewal hereof, to similar quality office space within the Building. If Landlord exercises this right to relocate Tenant, then any and all costs incident to said relocation shall be the responsibility of the Landlord; said costs to be determined prior to the relocation of Tenant. Likewise, if Landlord exercises this right to relocate Tenant, the first three (3) months in the new premises shall be free rent.”
Why it matters. The landlord may move the tenant at any time and any number of times so long as the substitute space is of similar quality, and the cost reimbursement plus three months of free rent are the only tenant protections, leaving limits on frequency, timing, and comparability of size and configuration on the negotiating table.
“Following the New Premises Commencement Date, Landlord shall continue to have the right to relocate Tenant to Substitute Space pursuant to, and in accordance with, the provisions, terms, and conditions of Article 43 of the Lease; provided, however, following the New Premises Commencement Date, Article 43 of the Lease shall be deemed amended to provide that (i) Landlord shall only have the right to exercise its rights under Article 43 one (1) time during the period between the New Premises Commencement Date and the Fixed Expiration Date, and (ii) in no event shall Landlord have the right to relocate Tenant pursuant to Article 43 of the Lease on or by a Relocation Effective Date that is any earlier than the date that is twenty-four (24) months following the New Premises Commencement Date.”
Why it matters. This amendment shows the negotiated middle ground for tenants who cannot delete a relocation right outright, capping the landlord at a single move and barring any relocation during the first twenty-four months after the tenant takes possession.
“ARTICLE 32 - RELOCATION Landlord shall have no right to relocate Tenant from the Premises during the Term or any extension thereof.”
Why it matters. This single sentence is the cleanest tenant outcome on the issue, a complete waiver of the landlord relocation right for the entire term and all extensions, which tenants with leverage can often obtain simply by asking. (Note: this excerpt is below the usual length range because the operative clause is one sentence; its brevity is the point.)