They want to renovate or demolish the premise that I’m leasing?!

Andrew Grima

Navigating relocation or demolition clauses when you’re a franchisee

The retail leasing landscape is constantly changing as a result of the increasing numbers of redevelopments in metropolitan areas. In this climate, retail tenants (who are often franchisees) are faced with the prospect of being asked to relocate or being notified that their current premises is being demolished.

This article will step you through demolition and relocation clauses in a retail lease.  

Relocation

What is relocation?

What happens when a landlord wants to renovate the part of a shopping centre that you’re currently leasing? The landlord can relocate you!

Relocation is the process whereby a landlord can relocate a tenant to another premises within the same centre for the purposes of refurbishment, redevelopment or extension.

What requirements must be met?

Many requirements must be met when a landlord wants to rely on a relocation clause, including:

Rights that tenants have

Moving locations can be particularly onerous for a tenant, particularly if the current shop has expensive fit out. In order to compensate for any disadvantages, tenants have various rights under their lease and the Retail Leases Act.

Landlords need to be aware that:

Demolition

What is demolition?

What happens if the landlord wants to demolish the premises as opposed to just relocate a tenant? They can terminate the Lease on grounds of demolition!

Demolition clauses can be used when a premises needs to be substantially repaired, renovated or reconstructed which can’t be carried out practicably without the premises being vacant.

What requirements must be met?

The landlord must:

Rights that tenants have

Conclusion

The current climate of redevelopment, coupled with shopping centres conducting renovations, refurbishments and extensions, can create some uncertainty for franchisees who lease premises.

As a result, it’s important that franchisees understand the implications of demolition and relocation, along with their rights to compensation and termination if they are faced with either.

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