Burt M. Polson - Commercial Real Estate Broker

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Don't Let Your Lease Expire!

I have seen it happen often, you have a thriving business, well established in the community, at a well-known location. You are so busy with your business you were not aware your lease expired. You panic and contact the landlord thinking the worst.

When you first sign a lease it is for a set period of time be it one year, three years, five years or longer. Oftentimes, you may also include in the lease an option to renew for another set period of time and terms. This essentially gives you, the tenant, a unilateral right to

extend the lease with predetermined terms. However, there is usually a time restriction as to when you can exercise your option. The lease could state you have 60 days but no more than 120 days before the lease expiration date to notify the landlord that you would like to exercise the option and continue the lease. Miss this time frame and you could be out-of-luck.

This reminds me of a call I received from an industrial tenant some time ago. He manufactured several items at his Napa County location where he leased a large industrial building. He was calling me for advice because the landlord sent him a letter that his lease expired two weeks prior and the landlord signed a new lease with another tenant. The landlord gave him 60 day’s notice even though 30 days was all he legally was required to provide. I told the caller that he was basically out of luck and to start packing. He was not happy to hear this because he had a tremendous amount of equipment and inventory to relocate.

Fortunately, stories like this are not too common. But a tenant needs to be aware when her lease is expiring or what the dates of the option window are in order to stay in the driver’s seat. I recommend to my clients to start a dialog with their landlord at least six months prior to their lease expiration date and in some cases a year or more. If you do not have an option to renew for an additional time period with set terms of the lease then you are basically renegotiating a new lease.

Not only is the length of a lease open for renegotiation, but all terms of the lease are negotiable. Keep in mind that the landlord can also renegotiate changes he desires as well. Other terms you may want to consider: rent amount, rent increases, first right-of-refusal to lease adjacent space for expansion, first-right-of-refusal to purchase the property, additional storage space, changes in your entity structure, removal of a personal guarantee, partial refund of security deposit.

It is important to have a broker tenant-rep represent you in the negotiations with the landlord. You may need to pay a fee to the broker for his professional services if you cannot negotiate the landlord to pay. But in the long run having your own broker will save you money and future issues.

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