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Are relocation clauses in commercial leases enforceable in Arizona?

On Behalf of | Dec 17, 2021 | Real estate transactions

Running a commercial building isn’t easy. There are many considerations and conflicting tenant goals that can make it difficult to allocate your limited space in the most efficient manner possible. A relocation clause may be essential in order to reserve the rights you’ll need to make adjustments to your building arrangement in the future. But will it be enforceable?

Relocation clauses at a glance

When you sign a commercial lease with your tenants, you are guaranteeing them the use of a certain space within your building. A relocation clause is a clause that you could include in your lease which gives you the right to relocate a tenant to a comparable space within your building, or even within a different building that you own, if certain conditions occur.

For example, you may decide that you need to move one of your tenants to a different space in order to renovate part of your building. As long as the substitute space that you provide them is similar enough to what they contracted for, and they are still getting the value of their lease, the relocation will likely be permitted.

A relocation clause can be essential, because it can give you certain rights and remedies that you otherwise may not have. For example, imagine that you have several commercial tenants renting space in your building, and one of your larger tenants wishes to expand their operation. A relocation clause could allow you to move some of the smaller tenants, giving your larger tenant room to expand.

Enforceability in Arizona

Arizona courts have historically respected the right of parties to a contract to make whatever agreements they wish, and have been hesitant to declare something unenforceable unless it is clearly unconscionable.

Thus, if you decide to include a relocation clause in your lease, it is likely to be enforceable, as long as it clearly states the rights that you are reserving for yourself, and the tenant has had an adequate chance to read the lease over and consult an attorney before signing it.

Being a successful commercial landlord requires flexibility in order to adapt to changes in your circumstances. That is why it may be a good idea to include relocation clauses in your leases, even if you do not intend to use them.