When a commercial tenant’s lease is nearing its expiration date, there are important decisions to be made. Should you renew the lease, negotiate new terms, or move to a new location altogether? Navigating lease renewals and extensions can be complex, but with a little knowledge and preparation, commercial tenants can make informed decisions that work for their business. In this post, we will provide a guide for commercial tenants on how to navigate lease renewals and extensions and highlight several lease clauses that are relevant to the discussion.
1. Review the Current Lease Agreement
Before deciding to renew a lease or negotiate new terms, it is important to review the current lease agreement thoroughly. Reviewing the lease agreement will ensure that the tenant is familiar with its terms, expiration date, and any renewal or extension options. Pay special attention to the requirements that must be satisfied to exercise any such options. In many cases, failing to deliver the notice to the landlord by a certain deadline may cause you to lose such options. Closely examine other areas of the lease, especially clauses such as rent escalation, termination, and subletting. Understanding these clauses is important when considering renewal or extension options.
2. Contact the Landlord
If the tenant decides to renew the lease or negotiate new terms, the next step is to contact the landlord. The landlord will need to provide the tenant with a lease renewal or extension agreement that outlines the terms of the new lease. The landlord may also provide a notice of lease termination if they are not interested in renewing the lease.
3. Negotiate New Lease Terms
When negotiating new lease terms, it is important to have a clear understanding of what you want and what is negotiable. Lease clauses such as rent escalation, renewal options, subletting, and termination can all be negotiated. Tenants should also consider requesting tenant improvement allowances or other incentives as part of the new lease agreement.
4. Consider Moving to a New Location
If the landlord is not willing to negotiate new lease terms or the tenant wants to explore other options, it may be time to consider moving to a new location. Moving can be costly, but it can also provide new opportunities for growth and expansion. When considering a move, tenants should consider factors such as location, size, and cost.
5. Plan Ahead
Whether the tenant decides to renew, negotiate new terms, or move to a new location, planning ahead is crucial. Tenants should start the process early to ensure they have enough time to make informed decisions and negotiate new lease terms. Starting early will also give tenants time to explore new locations and weigh the pros and cons of each option.
In conclusion, navigating lease renewals and extensions can be complex, but with a little knowledge and preparation, commercial tenants can make informed decisions that work for their business. When reviewing the current lease agreement, tenants should pay special attention to lease clauses such as rent escalation, termination, and subletting. Negotiating new lease terms can be an opportunity to secure more favorable terms for the tenant, including tenant improvement allowances or other incentives. And finally, planning ahead is crucial to ensure that tenants have enough time to make informed decisions and negotiate new lease terms.