Exercising an Option to Renew

By Ashlea Skupien

A commercial lease agreement may contain an option to renew clause, which allows the tenant to renew their lease for a further fixed term on the same terms and conditions after the initial lease term expires. Moreover, the lease agreement will determine how and when an option can be exercised.

Before the Tenant can exercise their option to renew, the lease may require formal written notice to the landlord at least six months before the end of the initial term. Understanding these notice periods is crucial for securing a further fixed term or changing the strategic direction of the investment.

If a tenant has an option to renew and fails to notify the Landlord of their intentions within the specified time and format, they may forfeit their option entirely. In this event, the Landlord can request the Tenant vacate the premises at the end of the term. Alternatively, a new Lease can be negotiated.

An option to renew may also change according to the tenant’s compliance with the agreement during the initial lease period. For example, if a tenant has breached their lease during the term, the landlord may refuse to renew.

Understanding the nuances of a commercial lease can be complex. At Bob Berry Commercial, we have a dedicated and specialised team, who can help. please contact Graeme or Ashlea for a confidential review of your investment.