A lease provision giving the tenant the right to extend the lease for one or more additional terms at a predetermined or market-adjusted rent, provided the tenant exercises the option within the required notice period.
Renewal options grant the tenant the unilateral right to extend the lease term for a specified period. The renewal rent is typically set by one of three methods: a fixed amount stated in the lease, a formula (often CPI-based), or fair market value determined at the time of renewal. Exercise requires strict compliance with notice provisions, including timing (usually 6 to 12 months before expiration), form (written notice), and conditions (tenant not in default). Failure to exercise on time generally results in permanent loss of the option. Some renewal options include a right to arbitrate fair market value disputes.
A tenant exercises its renewal option at the contractual rate, which is below current market rent. The landlord claims the notice was one day late and refuses to honor the renewal, seeking to re-lease the space at higher market rates.
Calendar your renewal notice deadline at least 30 days before it expires and send notice via every permitted method (email, certified mail, hand delivery). Strict compliance with timing and form requirements is essential. A missed deadline can cost you the option permanently.
Worried about renewal option in your lease?
Need to extract lease terms before your audit?
A CAM audit is only as accurate as your lease data. lextract.io extracts 126 structured fields from any commercial lease PDF: CAM definitions, pro-rata share, caps, base year, and audit rights. So you have the exact terms your landlord is supposed to follow.
Go to lextract.ioUpload two PDFs. 14 detection rules. Under 15 minutes. Free.
Find My OverchargesThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.
