The Option to Renew – Things to consider (Part #2)

Posted by: Nick Boertien | Posted on: September 20th, 2011 | 0 Comments

We’ve covered the first step in the process of determining whether you should exercise your Option to Renew which was to Engage a CRE Professional. Now to step #2.

#2. Get a lease proposal well before your notice date

The time frame in which a tenant must give notice to the landlord will
vary typically between a 3 – 12 month period. I always advise my clients to ensure they get a lease proposal at leastone month prior to the date the tenant is to advise the landlord of their intent to renew. By being proactive the tenant has time to work with their CRE professional to educate themselves on market rents, availability etc.If the tenant exercises their option to renew, they have contractually accepted the renewal term and in some cases without knowing what the landlords intentions are with the lease rates. If the landlord proposes rates that are what the tenant believes to be above market rates then what could follow is a costly arbitration process. Also most leases state that if the tenant continues to stay in the premises past the expiry date the rental rate increases to 150% or more until the renewal is signed.

The ONLY way to ensure you have the time and opportunity to make the right decision for your business is to be proactive and give yourself as much time as possible.

The final part of the series will discuss the renewal negotiation and issues to consider.

Posted by:

Nick Boertien
Client Advisory Services
DTZ Barnicke Waterloo Wellington Ltd.

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