Negotiating a renewal option is crucial for a tenant. Landlords benefit very little from these clauses, but for a tenant they can mean leverage in future negotiations and more favorable terms down the line. Here are a few of the benefits of renewal options, as suggested in the article, “Negotiating the Renewal Option”:
- A good renewal option protects you from circumstances in which other tenants in the property might want your space. You can negotiate to still have first rights to the space even if the other tenant will pay a higher rate or a larger tenant wants to expand into your space.
- A renewal clause is essential in the event that you have to invest a lot of money in making improvements to space, because a move would result in the loss of that money.
- A solid renewal cause is a good way to put a cap on the rental rate for another lease term.
- Your renewal clause can also protect you from unfavorable market conditions in a few years, especially if you have negotiated in detail your renewal rental rate.
Don’t forget about the importance of this renewal option as you negotiate your primary lease. It might seem like thinking too far ahead, but this foresight could save your business a lot of money in a few years.