Renewing Your Lease: Part One
Your Landlord Calls You to Renew… Now What?
It happens like clockwork.
You pick up the phone, and it’s your landlord. They want you to renew your lease. Promise it’ll only take a moment. Ask if they can send over the paperwork for you to sign. You probably feel a bit rushed, and perhaps even stressed by the velocity of the process, but you’re inclined to agree – after all, it’s just a renewal – it’s not like it’s a new deal, right?
This is where I urge you to stop, think, and assess.
Sort of like “stop, drop and roll” but for lease renewals instead of fire.
Every single time your lease comes up for renewal – every, single, solitary time – it’s a brand new deal, with a whole new set of rules, and further, a whole new set of playing cards that you have ready and waiting on the table.
That’s why I urge all tenants to seek representation – even if it’s not with me – because it’s that important to have the proper advisement and support while you go through the commercial real estate negotiations, whether you’re a start-up, or a well-established business renewing their lease for the sixth time.
It’s a common misconception that a lease renewal is just a matter of “signing on the dotted line” and accepting whatever is put in front of you. Far from it, in fact. There are a myriad of issues to consider when entering into the negotiations of a renewal.
Ask yourself these questions:
- Do I even have the right to renew my lease under the terms?
- Am I interested in expanding?
- Will my landlord offer inducements to entice me to stay in this location (a few months of free rent, a cash budget for renovations, an early termination option)?
- Is my landlord offering the fairest market rate for my space?
- Does my current space need renovations?
- Do I even want to stay in my current space?
From the above, you’re probably getting a clearer picture of all that goes into lease renewals. In my experience, they shouldn’t really be called “renewals” in the first place, because so much can change – and should. After all, it’s undoubtedly at least three years since you first signed, and more likely, it’s five to ten years later – the market is different, your landlord’s portfolio has likely changed, and your business has grown with the times.
The landscape in which you signed your first lease no longer exists – it’s vital that you renegotiate under the current terms and current real estate market.
So where do you go from here? We’ll examine that in part two.
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