How to Negotiate Your Monroe Commercial Renewal Options
The typical commercial lease ranges anywhere between the average of 5 to 10 years. The long term lease has become a normality in the commercial industry and will not be changing anytime soon. But inside these contracts typically include a potential renewal clause that will allow the tenant to renew their lease for beyond the amount initially stated. In the end, this is a big time benefit for the tenant.
What Is The Difference Between Short Term and Long Term Leases?
It may not seem like it when you initially sign the contract, but the long term lease will benefit your business. Commercial real estate agents and the landlords tend to focus on the signing of long term leases as the advantages add up very quickly. The disadvantages to signing a short term lease include:
- Fewer options for negotiation to the contract
- Out of pocket improvements to the space being rented
- Higher rental rates and the non-capability to fix any rental costs
In the end though, short term leases and long term leases truly come down to the flexibility that you can receive. Longer term commercial real estate leases will generally result in a smaller expense. This will include a higher amount of flexibility if you do look to renew and will favor your business exponentially in the long run.
Pieces of the Renewal Option
The renewal option is a necessity to have in your contract that will allow you to renew your current space for the same if not relatively the same amount of money per month. Here are parts of the renewal process though that you may wish to think about before beginning:
- Notice Period: Landlords need this period in order to see if they need to market their property for the next tenant to take over. This is typically anywhere from 6 months to a year prior to the lease ending. The longer that you have, as a tenant, to look at the market before selecting to stay the better.
- Term: This will allow you to see exactly how long you will need to renew your space for and what the time periods may be. The best idea is to get multiple renewal term agreements so you can solely focus on which would be the best for your company.
- Rental Rate: Some landlords will include a pre-set rental rate, whereas others will go off of the fair market value.
- Fair Market Value: A fair market value will allow the landlord and the current tenant the option to state that they would like to pay a fair market value for the space. This will lead to a negotiation, preferably with your tenant representative, that will allow you to figure out the best possible outcome for the market.
Of course, the renewal options do protect the tenant in many cases. Without these renewal options, you may be looking at your space being let go without the option to resign.
- A new tenant may pay a higher amount for the particular space
- A current tenant may want your space for expansion
- The amount of improvements you have made to the space may allow the landlord to know you will not be moving. This could increase the amount you will need to pay in order to continue to utilize that space
In any contract with your Monroe Commercial Real Estate, the renewal option should be a top priority. It is always wise to think of the future and this will allow for you to make the best decision possible when you decide whether or not your business should move from your current space. Always assume that the market will be in the current landlord's favor whenever you look to renew your space.