Do You Have a Right to Renew Your Commercial Lease?

A renewal option in a commercial lease gives the tenant the right to renew the lease by giving the landlord written notice in accordance with the lease terms.   A typical commercial lease term is 5 years, with an option for an additional 5 year term. It’s a good idea to negotiate the renewal option and any rental increases associated with the option at the beginning of your negotiations with your landlord. There are different ways to negotiate this.  Sometimes the rent goes up each year and each option year.  Other leases call for percentage rent which is based upon sales and financial information required to be provided by the tenant to the landlord in order to calculate the rent and rent increase.  You should also negotiate signage and referral requirements if you decide not to renew your lease and move your business to another location.  Commercial leases are complicated, and most of the time the parties do not understand their rights and obligations.  You should seek the advice of a commercial real estate attorney.

Tenant’s Rights in Absence of Option Provision

Most commercial tenants have the right to ask their landlord to renew their lease in the absence of a renewal option provision in the original lease.  There is no requirement that your landlord has to agree to renew your lease.  If you and your landlord have established a good working relationship, you pay your rent on time and have not violated any of the lease terms, there is a good chance that your landlord will be happy to renew your lease.  Be prepared just in case the landlord does not agree to renewal so that you have another potential space lined up that you could lease.   

Other Rights 

Commercial tenants have certain legal rights under state and federal laws beyond what is negotiated in your rental agreement.  The following are legal rights that you have:

• Contract rights.  Your lease gives you the right to use the property for a specific use.  You may have rights to make improvements to the property and to remain in possession of the property.  You also have privacy rights.  Your landlord cannot just enter your premises without giving you reasonable notice and cause.  You have the right to demand that your landlord repair broken items or items that are not in working order.  
• Health and Safety rights.  Under state or federal laws, your landlord has the duty to provide a healthy and safe environment. You may want to get an environmental report to make sure the property is free from environmental hazards.

Attorney Help 

It is recommended that you seek the help of a commercial real estate attorney to assist you with the lease negotiations. The attorney can explain the lease clauses to you, and advise you of your legal rights and obligations.  The attorney can also help you resolve any landlord/tenant disputes.