Option to renew vs option to extend

Commercial Leases: Option to Renew vs. What does option to extend mean? How do you extend a lease agreement? Do we need to extend the option period?

When that kind of option is grante the landlord and tenant should pay careful attention to whether the lease provides the tenant with either a right to renew or extend the lease, because those terms provide for distinctly different rights and obligations in the resulting lease agreements after the tenant has exercised its option. Option to Extend Many commercial leases contain either an option to renew or an option to extend the term of the lease. However, what many landlords and tenants do not know is that renewing a lease and extending a lease is not the same thing.

The terms of the option can include the length of the new term, a change in rent, and other modifications. If the option rests with the tenant to ask for a renewal, the landlord is obligated to agree under the terms of the option. Tenants frequently negotiate lease agreements with provisions or addendums which, on proper notice, allow the tenant to continue in lawful possession of the unit after the initial lease term expires.

A moderate, landlord-oriented sample option to extend the lease term provision is also included for your convenience. Use Option to Extend (Avoid Option to Renew) There are differences between an “extension” option and a “renewal” option. The specific term of the base period and of any options periods shall be determined at the time of the authorization to compete or extend the contract.

An option to renew creates a new leasehold estate and effectively surrenders the original lease. The term “ option ” as used in this subpart means a unilateral right in the contract by which the Government can extend the term of the contract. Each Option shall be for a term of five (5) years (the Renewal Term). Lease agreements can apply to both.

The option clauses also often contain time-sensitive or notice-specific provisions for the exercise of the option. Needless to say, options to renew are a fertile source of litigation. Our examination starts with the seminal case of J. Cross Bay Chelsea, Inc. Trade Stocks, Gold and Oil. Expert Option is a Great Solution For Trading and Earnings Money.

Another distinction is that a renewal requires the execution of a new written lease. On the other han an extension requires nothing more than an action by the tenant, according to the terms of the existing lease, to indicate an election to extend the lease. Generally speaking, tenants may prefer an option to extend the lease because it continues all rights under the lease that are personal to the tenant, whereas landlords may prefer to grant an option to renew the lease. However, an option to extend the lease may have potential benefits to the landlord as well, such as in cases where the lease has. With an option to renew , the tenant obtains another term of tenancy and the landlord is somewhat secured with rental income as agreed beforehand.

As an option to renew. The lease will usually provide that the new lease will be on the same terms as the existing lease, except that the rent will be reviewed in accordance with the rent review mechanism in the lease. The tenancy agreement should then be registered if it may, upon the exercise of an option to renew , be extended to a term of years or above. A lease contract may give the lessee (customer) an option to extend or terminate the lease. If such an option exists, a lessee should assess whether it is reasonably certain to exercise that option.

If so, exercising that option should be taken into account when determining a lease term. There may be instances where the tenant has exercised its option to extend and simply cannot come to acceptable terms regarding the new rent or other material business points with the landlord. In such instances, the parties must use one or more third parties to arbitrate these terms. The Eighth Circuit affirms a magical transmutation of contract language: it interprets an option to extend a commercial lease on the same terms and conditions — but less any rent concessions, etc.

Minnesota law supposedly requires renegotiation. When it comes to renewing a contract, the original contract may provide language regarding the option of a renewal. More often than not, it is all fairly cut and dry, but issues can sometimes arise if there are conflicts that extend past the point of the contract termination. The key concept to remember is that the renewal option is a benefit to the Tenant.

Chesapeake, the Seventh District Court of Appeals affirmed a holding by the Columbiana Court of Common Pleas finding an “extend or renew under similar terms a like lease” provision in an oil and gas lease grants the lessee two options: (i) to extend the lease on the same terms as the existing lease, or (ii) renegotiate for a renewal “like lease” on similar terms. The Court reasoned that “extend” and “renew” are distinct terms under Ohio law. Part three covers options to renew. If an option doesn’t exist and you are very likely to occupy the premises long term, you still only need to use the current term to determine the lease liability.

The landlord must provide the option to renew a lease, or not renew the lease, at least six months but no more than months before the expiry date of the lease. If the landlord does not give the notice within this time, the lease is extended by six months after the date on which the landlord gives the notice to the tenant.