Lease Option Perils or Advantages

RenegotiateLease sees many leases negotiated in the favor of the landlord. One of the major pitfalls for uninformed tenants is Options. Unfortunately, it is often too late for us to help commercial property tenants who did not negotiate their lease options properly at the time of lease negotiation. Landlords see options favoring tenants and wish to avoid them to provide themselves with maximum negotiating leverage at lease expiration. When landlords do grant options, they are often restrictive, unreasonable, or vaguely written. RenegotiateLease negotiates options which are fair and reasonable to our clients.

Notice to landlord is a common trap tenants fail to realize will invalidate an option if proper notice per the terms of the lease is not served upon the landlord. Many commercial lease option clauses have stringent timing deadlines such as notice not sooner than 60 days or later than 180 days prior to the expiration of the lease. Failure to inform the landlord property will invalidate your option and leave your business in a perilous position. Rengegotiate lease negotiates timing and notice requirements which are fair and reasonable to our clients.

It is crucial to negotiate the option rent and spell it out in the option. Many landlords will insist that the rent be calculated at “Fair Market Value” determined by landlord or by arbitration/appraisal which can be costly. A Fair Market Value option is really no option at all as you are vulnerable to unreasonable rent hikes at the time of option renewal. RenegotiateLease negotiates pre-determined rent schedules on behalf of our clients so you know exactly what you’ll be paying when you exercise the option and can plan ahead.

Most landlords write the option so that it is exclusive only to the tenant. That is, if you sell your business, and wish to assign the lease, the option will not transfer to your purchaser and many purchasers of businesses require options so that they know the length of time within the premises. Many tenants go through the time and expense of finding an assignee or subtenant only to find the option is non-transferable. The landlord won’t budge and you lose your assignee or subtenant.. RenegotiatLease negotiates options which are transferable to the assignee of the lease.

During the term of many leases, business owners will sell or wish to relocate prior to the expiration of their lease. This is called “assignment or subletting”. Improperly negotiated leases with no “assignment or subletting” clause means you’re stuck in the lease. Many commercial leases also require landlord approval of the assignment or subletting which grants the landlord the right to approve or disapprove the tenant based upon financial or other factors which are highly subjective. Often, landlords will disapprove the assignment or subletting on unreasonable grounds. RenegotiateLease negotiates assignment/subletting clauses which are fair to the tenant and require landlords approval not be “unreasonable” and spells out the requirements for landlord approval at the time of lease negotiation.

Many landlords require a fee often guised under “attorneys costs” or “lease assignment fee”. These fees can be thousand of dollars and can result in unexpected out of pocket costs for the tenant at the time the lease is assigned. RenegotiateLease negotiates fair and reasonable assignment fees and spells out ahead of time who pays the cost, i.e. the tenant or the assignee.

Options can be a tenant’s friend or worst enemy if not properly negotiated. Consult RenegotiateLease at the time of your lease renewal to avoid financial heartache and business disruption.