Looking for an article that explains to a tenant the benefits is including options to renew in a commercial or retail leasing arrangement. It should also remind them that the terms of their lease are negotiable before they sign on the bottom line.
First, explain what an option is – you have the option to say whether you take it up or not.
From the landlords perspective options can be a good thing or a bad thing. For instance a short term lease of say 3-5 years with no option to renew, gives the landlord a certain amount of freedom to sell the property or take advantage of a well-established tenant.
I’m not saying all landlords would take advantage of their tenant but if the tenant has a lease that’s expiring and the business is successful and well-established in the location, that does hand the landlord a certain amount of leverage.
Long leases may benefit the Landlord because they have the assurance of ongoing rent and that’s always a benefit if you are looking to borrow money. If you happen to be in a less popular area where vacancies are high, a long-term lease also works well for the landlord.
A short-term lease (without options) also works for the landlord if you happen to be in a populated area where there is a strong demand for the premises.
So from the perspective of the tenant, ensuring you have options for additional terms beyond the initial term gives the tenant security of tenure. Even though your lease may stipulate that rent be reviewed at the end of the initial term it will generally specify a formula or it may be a market rent review. Either way you are not at the mercy of your landlord.
During the initial term, the tenant will invest in infrastructure, shop fitout and any number of other business related investments which will take time to recoup. This is not the time to lose your lease.
So without going into a lot more detail, we would like you to add to the pros and cons as you see them and pull this together in an easy to understand article that any non-legal person could understand.
The audience for this article is Small Business owners.
