This option to renew clause is commonly seen in tenancy or lease agreements for industrial, commercial and residential properties. The option to renew clause is a good to have especially for tenants.
Priority to Renew
While the option to renew clause doesn’t guarantee renewal, the option to renew clause allows the tenant to have the priority to renew the lease before the landlord proceeds to look for a new tenant.
When to Start Discussion
While the option to renew clause may be stated in the tenancy agreement, the tenant may only express their intention to renew the lease closer to the expiry of lease (for example, two or three months prior to expiry of the lease depending on the contract). It is always advisable to express your intention to renew the lease on time in order to avoid a situation whereby your company is left without a space to operate from and also not forgetting that reinstatement works may still need to be done before handing back the premises to the landlord if your company decides not to renew the lease.
Rate to Be Mutually Agreed
The rate for the new lease term will also usually be discussed and mutually agreed among the landlord and tenant. If the tenant decides to renew the lease for another term, the landlord and tenant will then sign a contract for the renewal. Stamp duty will be also need to be done as a new agreement will be signed between the landlord and the tenant for the renewal. The renewal process is also sometimes done through a broker.