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A commercial lease extension is a binding contract that extends a tenant's use of a commercial property past the original lease period. As a business owner, the commercial lease you signed when you first rented your business space is one of your most important contracts. When the lease term is about to expire, it's crucial to consider whether you want to extend the lease or find a new space. This blog post will guide you through everything about commercial lease extensions.
Legal Aspects of a Commercial Lease Extension
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Lease Terms and Conditions
The terms and conditions of the lease extension should be clearly stated in writing, including the length of the extension, the rent amount, any changes to the lease terms, and the renewal options.
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Rent Increase
If the lease extension includes a rent increase, it should be clearly stated in writing, and the increase should be reasonable and in line with the current market rates for similar commercial spaces in the area.
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Tenant Improvements
The lease extension may require the tenant to improve the space. The lease should specify who will pay for these improvements and whether they will be considered the property of the landlord or the tenant.
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Legal Compliance
The lease extension should comply with all applicable laws and regulations in California, including zoning laws, building codes, and environmental regulations.
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Legal Counsel
It is important to have legal counsel review the lease extension terms to ensure they are fair and compliant with California law. An attorney can also help negotiate the terms of the extension to protect the tenant's interests.
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Mutual Agreement
A commercial lease extension in California requires a mutual agreement between the landlord and the tenant. Both parties should review and sign the extension agreement before it becomes legally binding.
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Record Keeping
All lease extensions should be kept in writing and maintained as legal records. This is important for both the landlord and the tenant to have a clear record of the terms and conditions of the lease extension.
Tips for Negotiating a Favorable Lease Extension
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Start Early
Begin the negotiation process well before the current lease expires to give yourself plenty of time to negotiate and review the terms.
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Research the Market
Research the current market rates for similar commercial spaces in the area to ensure the rent increase is reasonable and in line with the current market rates.
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Identify Your Priorities
Determine what is most important to you in the lease extension negotiation, such as rent, lease term, or tenant improvements. This will help you negotiate effectively.
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Make a Counteroffer
If you receive an initial offer that is not favorable, make a counteroffer with specific terms and conditions that are more favorable to you.
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Seek Legal Advice
It is important to have a lawyer review the lease extension agreement to ensure it is fair and compliant with California law.
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Use Leverage
If you are a long-term tenant with a good track record, you may have more leverage in negotiating favorable terms.
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Be Flexible
Be open to compromise and be willing to negotiate on some terms in exchange for favorable terms on others.
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Maintain Good Communication
Maintain open and clear communication with the landlord or property manager throughout the negotiation process to build trust and avoid misunderstandings.
Key Terms for a Commercial Lease Extension
- Renewal Option: A renewal option is a provision in the lease agreement that allows the tenant to extend the lease term for an additional period of time, usually at a predetermined rent rate.
- Rent Increase: The lease extension agreement may include provisions for rent increases, which can be based on factors such as inflation or the current market rates for similar commercial spaces.
- Length of Extension: The lease extension agreement should clearly state the length of the extension period, including the start and end dates.
- Tenant Improvements: The lease extension may provide tenant improvements or modifications to the commercial space. The terms of these improvements, such as who will pay for them, should be spelled out in the agreement.
- Legal Requirements: The lease extension agreement should comply with all legal requirements under California law, such as rent control or tenant rights. It is important to have a lawyer review the agreement to ensure compliance with applicable laws and regulations.
Final Thoughts on a Commercial Lease Extension
A commercial lease extension in California can be a useful tool for landlords and tenants interested in extending a commercial lease beyond its original term. By extending the lease, landlords can maintain a reliable source of income from their commercial property. At the same time, tenants can continue to operate their businesses without the expense and inconvenience of finding new space.
However, it is important for both landlords and tenants to carefully consider the terms of the lease extension before agreeing. It may include negotiating rent increases, changes to the extension length, or other modifications to the lease terms. Additionally, it is important to ensure that the lease extension complies with all relevant laws and regulations and to seek the advice of a legal professional if necessary.
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Meet some of our Commercial Lease Extension Lawyers
Ted A.
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Attorney Kegler has been licensed to practice law in the State of North Carolina since 1998. Over the years, she has worked in firms that focused on small business financing, initial startup formation, to starting several businesses of her own with bootstrap financing to venture capital funding. As a Certified Dream Manager, she couples the skills of listening to understand the big picture to get to solutions that not only fit today's needs but also the long term needs of her entrepreneurial clients.
Alen A.
Alen Aydinian is a seasoned real estate attorney with a wealth of experience in handling transactional matters, real estate transactions, and lease agreements. As a licensed real estate broker, Alen Aydinian brings a unique perspective to the table, allowing clients to benefit from both legal expertise and practical industry knowledge. He is a trusted advisor in the realm of real estate transactions and lease agreements. Whether representing buyers, sellers, landlords, or tenants, Alen Aydinian is committed to providing strategic counsel and dedicated advocacy every step of the way. Clients rely on him for sound legal guidance, proactive problem-solving, and unwavering support throughout the transaction process.
Brianna N.
Brianna is a well-respected New York licensed attorney with a Juris Doctorate degree in law from Touro College Jacob D. Fuchsberg Law School and bachelor’s degree in Business Administration and Management from Dowling College. Since becoming an attorney, she has practiced in various areas including business law, corporate law, residential real estate, commercial real estate, criminal law, traffic law, employment law, landlord tenant law, estate planning, and has represented intermediaries in procurement and the personal protective equipment industry. Brianna has broad and extensive business experience; She is an entrepreneur and co-owner of a microtechnology manufacturing company that was built by her and her partner, where she also served as the Chief Legal Officer and Human Resource Manager for the company. While building the manufacturing business, she created a brokerage firm for business transactions and has managed several other businesses which she has ownership interest in. Brianna’s involvement in these various businesses over the past 15 years provides a unique skillset to her clients; Not only does she understand contractual principals and obligations from a legal perspective while drafting and negotiating agreements, but she also has the foresight, experience, and ability to ensure the agreement reflects the practical aspects of the business. Based on the client’s needs and desired outcome, she has the forethought to cover different angles that would be overlooked from a legal standpoint, and as a result she is able to help prevent unforeseen business ramifications. She conducts extensive risk assessments on behalf of her clients and minimizes exposure to potential liability without “over lawyering” agreements. One of Brianna’s main areas of focus is drafting and negotiating agreements. Negotiation is a passion of hers which was applied in law school while she was a member of the Alternative Dispute Resolution Society, notably winning Touro Law School’s intraschool negotiation competition. In her more recent years, Brianna has removed herself from her various business interests to focus on her law practice. Brianna has a strong moral compass and believes in quality over quantity. She treats every client as a top priority; thus, she will not take on many cases at a time because she wants to give each client the focus and attention they deserve. She has sharp attention to detail and is a forceful advocate for every client. Brianna has broad and extensive business experience; She is an entrepreneur and co-owner of a microtechnology manufacturing company that was built by her and her partner, where she also served as the Chief Legal Officer and Human Resource Manager for the company. While building the manufacturing business, she created a brokerage firm for business transactions and has managed several other businesses which she has ownership interest in. Brianna’s involvement in these various businesses over the past 15 years provides a unique skillset to her clients; Not only does she understand contractual principals and obligations from a legal perspective while drafting and negotiating agreements, but she also has the foresight, experience, and ability to ensure the agreement reflects the practical aspects of the business. Based on the client’s needs and desired outcome, she has the forethought to cover different angles that would be overlooked from a legal standpoint, and as a result she is able to help prevent unforeseen business ramifications. She conducts extensive risk assessments on behalf of her clients and minimizes exposure to potential liability without “over lawyering” agreements. Additionally, she specializes in drafting and negotiating agreements. Negotiation is a passion of hers which was applied in law school while she was a member of the Alternative Dispute Resolution Society, notably winning Touro Law School’s intraschool negotiation competition. In her more recent years, Brianna has removed herself from her various business interests to focus on her law practice. Brianna has a strong moral compass and believes in quality over quantity. She treats every client as a top priority; thus, she will not take on many cases at a time because she wants to give each client the focus and attention they deserve. She has sharp attention to detail and is a forceful advocate for every client.
Jeff C.
Experienced and broad based corporate/business attorney and Outside General Counsel (OGC), for start-ups, small businesses and growing companies of all sizes, advising and assisting clients with corporate and LLC formation, contracts and agreements, internet and terms of use/service agreements, trademarks and intellectual property protection, the purchase and sale of businesses (M&A), labor and employment matters, compliance and risk management, corporate governance, and commercial leasing matters. See other reviews on my website at www.ogcservices.net/reviews
Paul S.
I focus my practice on startups and small to mid-size businesses, because they have unique needs that mid-size and large law firms aren't well-equipped to service. In addition to practicing law, I have started and run other businesses, and have an MBA in marketing from Indiana University. I combine my business experience with my legal expertise, to provide practical advice to my clients. I am licensed in Ohio and California, and I leverage the latest in technology to provide top quality legal services to a nationwide client-base. This enables me to serve my clients in a cost-effective manner that doesn't skimp on personal service.
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Christopher J.
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