Diplomatic Clause – The Do’s and Don’ts

Diplomatic or Transfer Clauses

 Let’s look at a few areas of concern and some Don’ts based on recent occurrences.

As we know, Houston is the oil capital of the world and a leader in international business.  As a result, we see employee transfers on a regular basis.  Many international companies know that their employee will be in Houston for a limited time.  For that reason, some companies insist that the employee only lease.  And, the company requests that the lease provides for the company to be able to move the employee out of Houston if needed for a new job assignment.  Therefore we run into this issue frequently:

Can I write a “diplomatic clause” or “transfer clause”.  NO, but DO include one in a lease if requested.  How?

Diplomatic Clauses and Transfer Clauses – Let the wording come from the Employer or Employee!

With 132 forms provided by the Texas Association of REALTORS®, and 24 forms from the Texas Real Estate Commission for agent use, there is not a form provided when a tenant and/or tenant’s company requests a provision whereby the tenant can terminate an executed lease if the tenant is transferred due to employment.

Frequently referred to as a “diplomatic clause”, because transferees are oftentimes from outside the United States, or as a “transfer clause” for obvious reasons, agents are often asked to add such a clause to a residential lease.  On their own, the agent cannot construct this clause or make such a form! The provisions appropriate to each situation and for each tenant/company will be different.  Therefore, trying to devise such a clause or form for inclusion in aTAR 2001 Residential Lease,  could constitute the practice of law.

Most transferee’s companies will have their own transfer clause form and will request that it to be added to any lease for their employee as an addendum.  If the company doesn’t have such a document, the company likely has an in-house legal counsel that could draft wording for the employee who might be transferred in the future.  If the company routinely transfers employees, it is unlikely that the Human Resources Department or the employee’s supervisor would not know where to find the form and/or wording.

If such a clause does not exist, request that the employer or employee put in writing what is being requested by the company regarding terms if and when the employee is transferred due to business reasons; and not from the downtown office to The Woodlands office, that doesn’t usually constitute a “transfer” in the eyes of the landlord.

Understandably, a landlord may be apprehensive to allow a tenant to occupy a property with the potential of moving before the end of the agreed upon lease.  Remember, the landlord will be paying a commission for the term of the entire lease.  An agent might find that the landlord will try to negotiate on the commission in view of the potential “transfer clause” being enacted.

Do not play attorney trying to be helpful.  Request the employer or employer’s attorney to provide the wording and or form.   If instructed in writing, the agent should include the wording in the lease agreement and maintain careful documentation to show that the employee and/or company instructed the use of the wording in the lease; and, that it was drafted by the employee/employer and NOT the agent.  The wording, if short, would go in Section 26, Special Provisions of the lease, or if longer, added to Section 31 as an Addenda and then attached to the lease.   The form would be called an Addenda and should include signature lines and date lines for both the landlord(s) and tenants(s).

Keep it simple and avoid future problems when the tenant needs to move.  Look to the employer for the wording and details.  And, don’t practice law!