October 13, 2019

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You Don't Have to Go Home (But You Can't Stay Here): Negotiating Construction Related Relocation Rights

For most of the country, summer season also means construction season, which impacts everything from your morning commute to your vacation plans. For landlords and their retail tenants, construction season also means center upgrades and relocations. While construction-related relocations may be temporary, coordinating the details of the move may feel like a full-time job. Whether you are the landlord or the tenant, a well thought out relocation clause can help set the groundwork for a more streamlined process and alleviate much of the uncertainty involved in the process.

Landlords often seek to maximize occupancy flexibility by requesting broad relocation clauses in their retail leases, while tenants often seek certainty through the deletion of these provisions. One of the best ways to reach a middle ground is to negotiate defined purposes for which relocation would be a suitable option and the construction or redevelopment of the center is a common restriction used in the relocation clauses of retail leases. In negotiating these provisions, it is important to drill down into the details of what level of construction or development is required to trigger the clause (i.e. is relocation only suitable in the case of substantial redevelopment and, if so, what does substantial mean) and what proof is required to show that this threshold has been met (ex. permit applications, construction plans, proposed timelines).

In addition to defining a triggering event, defining the time period during which the relocation right can be exercised can also help the parties find a middle ground. For example, if the landlord does not have plans for construction or redevelopment at the time the lease is being negotiated, but is merely hoping to retain flexibility for the future, stating that the relocation right does not take effect until after a specific number of years can make this provision more palatable to a tenant who is concerned about their business being upended shortly after the lease begins. Including certain black out months is also a common middle ground for tenants who don't want to be shut down during their busy seasons.

Requiring sufficient notice periods prior to the exercise of such rights is also a great way to ensure that both parties have the time they need to plan. Considering the long lead time for most construction and redevelopment projects, it is often possible for landlords to provide several months' notice without slowing down their project and these lead times help tenants as well.

Tenants negotiating relocation clauses will often want to include parameters for the type of space to which the tenant can be moved and frequently request the addition of approval rights over the suitability of the space. Whether a landlord can grant these rights often depends on the type of center, uniqueness of the retail spaces and the tenant mix.

Other specifics that should be addressed include signage provisions (how will tenant's new space be identified and will the old signage be removed/covered up to avoid confusion), storage (if the temporary space is smaller than tenant's regular location), and the installation of any necessary improvements in the temporary space. Of course, no good relocation provision would be complete without addressing cost. It is imperative to outline who will be responsible for the costs associated with the relocation and the move back to the original space once construction is complete and what rent will be paid by tenant during such periods.

No matter what the season, a well-negotiated relocation clause can help create balance between a landlord's need for flexibility and a tenant's need for predictability.

©2019 von Briesen & Roper, s.c

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About this Author

Chris A. Jenny, von Briesen Roper Law Firm, Madison, Corporate, Real Estate and Family Estate Law Attorney

Chris A. Jenny is a Shareholder in the Madison office of von Briesen & Roper, s.c. He focuses his practice on representing business owners in a wide variety of niche markets to become more profitable while minimizing their risk and expenses. Chris’s practice has a heavy concentration in the real estate, construction, and information technology industries. This practical experience is a tremendous benefit to the contractors, suppliers, landlords, tenants and real estate developers he represents. Chris’s construction...

608-661-3973
William West, von Briesen Roper Law Firm, Milwaukee, Corporate and Real Estate Law Attorney

Bill West is a Shareholder. He Chairs the Firm’s Business Section and the Firm’s Mergers & Acquisitions Section.

Bill is a trusted advisor to his clients and they rely on his ability to achieve desired outcomes in a practical, timely and cost-effective manner – in other words, he gets things done. He has over 30 years of experience in corporate and business related transactions including:

  • Mergers and acquisitions

  • Complex corporate and commercial transactions

  • Corporate governance and business counseling

  • Business formation, strategy and structure

  • Business succession planning

  • Commercial real estate

Bill’s clients are involved in a range of industries, and include public and privately held businesses engaged in a wide variety of domestic and international transactions including asset and equity acquisitions, mergers, reorganizations, divestitures and restructurings.

Bill is also co-chair of the firm’s Retail Real Estate section. He represents clients nationwide in the purchase and sale of commercial real estate. Bill has a national practice handling the retail real estate leasing needs of both tenants and landlords.

Bill is a member of the American Bar Association (member of the Business Law, Real Estate and Taxation sections), and the State Bar of Wisconsin. He is also a co-author of LLCs and LLPs: A Wisconsin Handbook, 1st, 2nd and 3rd Editions, published by the State Bar of Wisconsin.

Bill is recognized by The Best Lawyers in America® as “Lawyer of the Year” for Closely Held Companies and Family Businesses Law in Milwaukee (2017). He is listed in The Best Lawyers in America® for Business Organizations (including LLCs and Partnerships) (2015-2018) as well as Closely Held Companies and Family Businesses Law (2014-2018).

Bill served as Chair and a member of the Board of Directors of Catholic Memorial High School.

414-287-1375
Megan Jerabek, von Briesen Roper Law Firm, Madison and Milwaukee Corporate, Real Estate and Family Estate Law Attorney

Megan Jerabek is the co-chair of the Trusts and Estates Section and a Shareholder in the Business Practice Group. Her practice focuses on the following areas:

  • Estate Planning;

  • Trust Administration;

  • Business Formation;

  • Business Transactions;

  • Real Estate and Commercial Leasing; and

  • Business Succession Planning.

Megan...

608-661-3983