When’s The Last Time You Thought About Your Lease?
Year-end is a great time to review your lease and plan for next year. For many clients, the lease is relegated to a desk drawer after initial negotiations, to be dusted off only if a dispute arises. But there are several reasons to give your lease an annual review, even if things with your landlord are going well. Here are just a few:
- Get a Better Deal. If you’re coming up on the end of the term, that’s an opportunity to negotiate favorable renewal terms. Your bargaining position will be stronger if you understand your alternatives, and use them to drive the best bargain.
- Audit CAM. A consideration for those with ‘net’ leases is the pass-through of common area maintenance (CAM) expenses. Some leases give tenants the right to audit CAM expenses. But tenant audit rights are frequently use-it-or-lose-it—your right to an audit may be lost by failure to request it by the deadline.
- Right–Sizing. If your business is growing or shrinking, your existing space may become sub-optimal over time. Tenants frequently use expansion or contraction options to give themselves flexibility in that regard, and your rights to exercise those options are probably subject to specific rules about giving notice.
- Tenant Improvements. If you’re thinking about fresh interior improvements, then it’s worth checking the lease to see if the landlord has notice or approval rights. You may be able to negotiate some fresh improvements in connection with a renewal.
We recommend that you set automatic calendar reminders for an annual lease review and for any critical notice deadlines in your lease. If you have any legal questions about your lease, we’d be happy to be of service.
DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.