Your Option to Renew
When you moved to your current office space, you likely invested considerable time and money to optimize design, complete renovations, purchase furniture, and set up an IT network to suit your business requirements. In an effort to protect your interest in the space, you likely also negotiated an option to renew, to avoid having to move and repeat the process at the end of your lease.
Filed away and forgotten
More often than not, tenants sign their lease, file it away, check that box on their to-do-list and completely forget about it. Why re-visit all that legal mumbo jumbo? It is not exactly a page turner! However, it’s important not to completely forget about your lease, since it contains critical dates, like the notice period.
A Critical Date
If you review your option to renew, there will be a notice period defined in the language. Typically, if you plan to exercise your option to renew, you have to let your landlord know a certain number of months prior to the expiry of the term. Based on the wording of your lease, you may have to provide anywhere from 6 to 12 months written notice. If you miss the notice period date, your option to renew is gone, and the landlord has the right to start marketing your office space for lease.
What Can Happen?
So, what happens if you forgot about your notice date, or simply didn’t respond? Don’t panic. Your landlord likely wants you to stay, and won’t lease your space to someone new without confirming if you want to renew your lease. It’s always a lot less expensive for a landlord to renew a tenant’s lease than to find a new tenant. That said, there are scenarios where your landlord may want to lease your space to another tenant. For example, what if a much larger tenant in the building needs expansion space? If you were the landlord, would you tell the larger tenant that you can’t accommodate their growth and risk they leave, or would you try to free up space in the building? Your landlord is likely a good person but he or she is also running a business. Personally, if I was in his or her shoes, I would aim to accommodate the larger tenant, even if that meant forcing a smaller tenant to relocate.
To ensure you don’t let your option to renew slip away, you should consider the following recommendations:
1. Create a lease summary highlighting critical dates like your notice period;
2. Set a calendar alert or reminder of critical dates;
3. Consider preparing your renewal notice in advance and append it to your lease.
Think of it as part of a bigger leasing strategy that aims to protect your interest in your space, and avoid unnecessary, last minute scrambling if you are forced to relocate. It’s just good business. If you don’t have the time or interest to take these steps, request a lease summary from your lawyer, or outsource it to a broker (for free).
For questions, comments, assistance, or a lease summary, please contact me directly.
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