Free or abated rent. In robust times like we’re seeing industrially – free or abated rent would encompass many fewer months than in more difficult economic times. As a landlord’s motivation increases, so does the amount of free or abated rent he is willing to consider. Half to one month per year of the term is pretty standard.
Extension rights. What happens at the end of your lease? That question is answered via extension rights. Whether they are a Right of First Refusal to Extend, a Right of First Refusal to take additional space, a Right of First Offer for additional space or some sort of an Option to Extend or Purchase or an option to purchase arrangement – all can be found in the request for an extension right.
Lease Document negotiation and language – Lease negotiations hopefully result in owners and tenants finding common ground on the economic terms that define a lease often using a Letter of Intent to help with the process. Once the terms have been agreed to, the parties can move on to the Lease. Since this is the legally binding document that defines the obligation of the tenant to pay a sum certain over a specified period of time. It also defines the circumstances that set the expectations that a landlord should have relative to insuring that he gets paid what the tenant must pay. Both parties hopefully have the benefit of an experienced commercial real estate professional and an attorney experienced in real estate lease language. The goal should be to protect each party without killing the deal with lease language that is overly adverse to other party
Miscellaneous. Many large corporate leases will have opt-out or termination clause within their leases. Some also might include an allowance for moving expenses, a must take provision whereby a tenant agrees to lease a smaller square footage today in return for an absolute agreement to expand into additional square footage in the future.
Lease renewals. The biggest difference between a lease renewal and the origination of a new lease is the tenant is currently in residence and desires to stay. Therefore many of the terms and conditions above or non-applicable. Things such as the miscellaneous category which includes termination rights are probably not included in a lease renewal. Many times free or abated rent are excluded. But the length of term, the lease rate, and in certain cases clean- up or a small allowance for carpet are included within at lease renewal.
One suggestion with respect to your renewal: Please, don’t try this on your own. Even if you have a wonderful relationship with your landlord, it’s always best to have representation by a commercial real estate professional who is familiar with market conditions and can advise you accordingly.
