Is It Legal to Include a Relocation Clause in My Commercial Leases?

Commercial Lease agreement with money on a table.

California is one of the most renter-friendly states in the nation, as evidenced by the recent imposition of statewide rent control and other legal precedents. In an environment such as this, you may desire to include relocation clauses in the lease agreements for all of your commercial properties, but you may wonder – will a California court enforce these clauses in the event of a dispute? Are they even legal under California law?

Relocation Clauses at A Glance

A relocation clause (sometimes called a “substitution space clause”) is a provision in a commercial lease that gives the landlord the right to relocate the tenant to a comparative alternate space. Typically, you would specify in the contract the conditions under which you would be able to exercise this right, as well as where you would relocate your tenant.

For example, if you decide to expand your building or perform renovations, or if one of your other tenants requires additional space, you could use the relocation clause in your lease with a smaller tenant to move them to a vacant office or store in the same building, or even a different building – as long as you meet the conditions laid out in your lease agreement.

California Law and Precedent

There is no statute on the books in California specifically mentioning the enforceability or legitimacy of relocation clauses. There has also not been a case decided by California courts setting a precedent for enforceability – except for one unpublished opinion, in which the court did not declare such a clause unenforceable when given the chance.

This means that parties are welcome to negotiate whichever terms they wish in their contracts – including a commercial landlord putting a relocation clause in their lease. As long as there are clear conditions for invoking the clause, and as long as you stay within the bounds you set, you should not have trouble enforcing it.

The use of a relocation clause in your lease agreements can give you the flexibility and control that you need to make the optimum use of your available space, while accommodating the varied needs of your individual tenants.