A “demolition clause” in a commercial lease is a clause that allows the Landlord to cancel the lease in order to demolish the building. This clause is often found in New York City retail leases. The clause is designed to protect the owner’s right to demolish the existing building and construct a new (often larger) building.
A demolition clause can result in the forfeiture of Tenant’s valuable leasehold interest, including Tenant’s improvements and good will. Therefore, the demolition clause may not be exercisable for a specified number of years, it may require a minimum amount of notice, and there may be compensation to the Tenant.
The demolition clause is a good example of why commercial Tenants should be represented by an experienced real estate attorney. Otherwise, a Tenant can invest substantial resources in the Premises only to find out that the Tenant’s lease is being cancelled because the building (or a portion of the building) is being demolished.
*Thank you for taking the time to read this article. This article is part of our “Commercial Leasing for Non-Lawyers,” a Blog Series on Commercial Leasing. Other aspects of commercial leasing transactions in New York are discussed in other Parts of this series.
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