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SEARCHIncluding a Renewal Term in your Lease or Renewal document can be a smart move, but it's important to understand exactly what it means and how to leverage it to your advantage. Summit Salon's Lynn Chisholm walks you through what you need to know.
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When it comes to your commercial lease, the fine print can make all the difference—especially when it’s time to renew. Including a Renewal Term in your Lease or Renewal document can be a smart move, but it's important to understand exactly what it means and how to leverage it to your advantage.
A renewal term is a clause in your lease that gives you, the tenant, the right to extend your lease for an additional period—typically under similar terms. But don’t let the word "renewal" fool you into thinking it’s automatic or guaranteed.
Let’s break it down:
Your Eligibility Matters: You must be in full compliance with the terms of your original lease. If you're behind on rent or in breach of any other conditions, your renewal rights can disappear entirely.
Negotiable Rent: While many terms may stay the same, key incentives such as free rent, tenant improvement allowances, or landlord work are typically not carried over. The rent for your renewal term is negotiable and ideally should reflect fair market value. Ensure your lease specifies the fair market rent—and even better, includes arbitration provisions in case you and the landlord disagree.
Timing Is Everything: Most renewal clauses will give a window for when you can notify the landlord of your intent to renew—usually between six and nine months before your lease ends. But here's a pro tip: start preparing at least 18 months in advance to keep your options open and negotiate the best deal.
If your lease doesn’t include a renewal term, it just means you need to be more proactive. Start discussions with your landlord early (18 months prior to expiry is optimal) and be ready to negotiate your renewal from scratch.
A renewal isn’t just about rent. It’s the perfect opportunity to address other issues:
Have a leaky roof?
Been paying out-of-pocket for HVAC repairs?
Want to remove your personal guaranty?
Now’s the time to speak up. Don’t wait until you’re locked into another term.
If your landlord asks you to exercise your renewal option before they give you a proposal—say no. That gives away your leverage. Instead, ask to see their renewal proposal first, so you can review and respond with your best interests in mind.
Exception? If you negotiated a below-market fixed rent in your renewal clause, and market rates have risen, go ahead and lock that in early. It could save you a bundle.
Need help negotiating your lease renewal? I offer free Lease Consultation calls to help you navigate your options and ensure you're getting a fair deal. Contact me at leasing@summitsalon.com
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