Section 27 Lease Extension Options

• Library: Real Estate Leasing and Landlord-Tenant Actions and Remedies 2011

Leases often give the tenant the right to extend the term of the lease beyond the initial term. Leases often refer to these extended terms as extension terms or renewal terms, but the term “extension term” or “extension option” is used here. Extension options provide the tenant with the certainty of knowing that it will have the ability to continue to operate its business for an extended period of time without incurring the absolute obligation to continue to lease the leased premises and make rent payments. Lease extension options are primarily for the benefit of the tenant, although a landlord may benefit from extension options in that the landlord will continue to have a tenant occupying the property and paying rent without the need to locate a new tenant. Keeping the current tenant in place:

may save the landlord the cost of paying additional brokerage fees; avoids the potential of having the property set vacant; and

in many instances, avoids or minimizes costs incurred to repair or...