In theory, the process of lease renewal would follow the terms of the original lease agreement. The landlord would be notified within the predetermined period of time of the tenant’s intentions and the tenant would either exercise the existing option to renew, or an extension of the lease would be drafted.
In reality, the time of lease renewal could be filled with a lot of uncertainty, opening the window to major terms renegotiation. Which rates is your lease set to get renewed at? In most cases it’s the fair market value – a subjective number that could be manipulated depending on whose side is doing the market research.
What’s the possibility of a rent re-negotiation happening with your lease renewal? That depends on how much your financial situation is dependent on the tenant staying. A landlord who has a better tenant lined up, or whose property is the only suitable location for this type of tenant, has nothing to be concerned about. The tenant will be the one trying to get the lease renewal signed before the lease expiration. On the other hand, if your tenant is a strong NNN franchisee and your financial wellbeing is tied to keeping the tenant and charging a certain amount of rent, you could find yourself being strong-armed into settling for less favorable terms.
The one crucial point to remember is that it’s nothing personal, just savvy business people doing what’s best for their business. Business people get wealthy when they know how to make money and how to keep the most of it. That should be you. By letting fear and uncertainty lock you into a contract that delivers less than what your property is worth, you are not only lowering your property’s value, but also setting a precedent for future unfavorable lease renewals.
We at Moschetti Law Group pride ourselves in helping our landlord clients sidestep the power struggle, keep the occupancy high, tenant turnover low and rents at the rates that support the value of the property and its stable future.
Please see our offer below on how we can help your specific case. We are looking forward to finding solutions to your lease renewals issues.