OPTIONS CLAUSES - Understanding Commercial Leases - Part 11

This is part 11 of a multi-part series on Understanding Commercial Leases

OPTION CLAUSES

OPTIONS TO EXTENT - Clause grants Tenant 1 or more options to extend lease term for a rental rate to be determined in accordance with lease.

OPTIONS TO EXPAND - Clause grants Tenant the right to expand into adjoining space in accordance with mechanism in lease.

RIGHT OF FIRST REFUSAL TO LEASE OR PURCHASE PROPERTY - Clause grants Tenant the right to require Landlord to offer him the option to lease (and sometimes purchase) a property BEFORE Landlord can lease or sell to any other party.

EARLY TERMINATION OPTIONS - Clause grants Tenant right to terminate the
lease PRIOR to expiration. Tenant is sometimes required to pay a fee for doing so.

LANDLORD'S INTEREST

• Limit options as much as possible.
• Set up option rental rate provisions that call for built-in rental increases.
• Options To Expand Don’t negotiate provisions that “tie” the
• Don’t negotiate provisions that “tie” the Landlord’s hands or delay the Landlord when they are trying to lease space or sell property to third parties.

TENANT'S INTEREST

• Obtain as many options as possible.
• Set up option rental rate provisions that keep rental rates down as much as
  possible.
• Negotiate restrictions that prevent or delay Landlord from taking actions that might not be in Tenant’s best interests.