Please Rotate Your Device
This is a case of a landlord not having the right to re-develop their 10 storey, B class midtown office building, due to one lease clause (or rather there lack thereof).
Our client was in the process of being relocated in their building and turned to Lease Ref for some advice. The landlord had the right to do so, so long as they paid for the landlord paid for the relocation costs. The client was being moved in order to accommodate the expansion needs of a neighboring tenant on their floor.
After the review, Lease Ref noticed that there was no demolition clause. That is the landlord's ability to evict all tenants in order to redevelop the building (usually used to increase density or to change the use of the property).
Here was the email our staffer sent to the client:
Please find attached your lease review. You will notice in the first paragraph that there is no landlord right to demolish the building. This is a little unusual as landlords normally have the right to tear down their building if it is more lucrative to build a different type of building - such as a taller office building or convert the property to a residential use.
Since there are a number of high-rise condominiums in the area, I suspect that the lack of a demolition clause was an oversight on the landlord's part.
This could be a valuable missing clause for you as it lowers the value of the building and blocks the landlord's ability to maximize air rights. The landlord may be willing to trade incentives (like offering you free rent) in exchange for you agreeing to putting the clause into the lease at some point.
All other points in the review should be pretty self-explanatory. Please email me if you have any questions,
In this case, the market supported condominiums that were up to 70 storeys, and the most profitable use (called the highest and best use) of the property was to tear down the small office building and construct a high-rise condo. The new landlord had purchased the building with redevelopment in mind and for some reason our client had the only lease in the building without a demolition clause.
With no demolition clause for the landlord and 8 years left on our client's lease, the landlord could not redevelop without our client's consent. Did we mention the client also had a 5 year renewal right? That's 13 years of not being able to redevelop!
There are no hard and fast rules on what should happen in these cases. Our client was in the driver's seat and they decided their price was $600,000. Part of that would go to fund new leaseholds in another building when the time came, but a large part of it was in the form of immediate free rent.
It was certainly an interesting discovery. What's in your lease?