Why you should only exercise once every three years
Commercial leases can appear relatively simple but are actually one of the most complex areas of law that business people regularly encounter.
If you have secured a commercial tenancy, there is a good chance that your lease agreement may contain an option to renew the tenancy for a further term. This may only come up once every three years (or it could be five or ten, depending on your lease terms), but it is imperative that you get your renewal right.
If you wish to take up a further tenancy, it’s important to ensure that you exercise the option validly. Here are a few simple tips to consider.
1) Remember to use the appropriate form of communication
Your lease document will likely stipulate the correct method of exercising your option. This may be email, facsimile, registered post, hand delivery... carrier pigeon or smoke signal. REMEMBER: just because the landlord (or its agent) uses email doesn't mean you can give notice by email.
2) Most leases will contain a "window" of time within which a notice of exercise of option can be given
You MUST ensure you exercise the option within this window. If you attempt to exercise your option "out of time" your landlord will have significantly more bargaining power. You may be placed over the proverbial barrel when it comes time to agree on the commencing rental for the new term!
3) Consider the appropriate recipient for the notice
HINT: there may be more than one! Check the lease for details of the address for notices. This may the landlord's lawyer, its agent, registered office, home address or mother-in-law's condominium (unlikely but you get the point!).
4) Now is the time to negotiate!
This will depend largely on the bargaining position of each party but most landlords do not want their premises vacant and, provided you have not inadvertently committed to exercising the option, the window referred to in 2) may be the most opportune time for you to re-negotiate the terms of your lease.
For more advice about renewing your lease, talk to MDL
If your lease is coming up for renewal and you need help exercising your option, call the experienced Business Law team at McCarthy Durie Lawyers today on 3370 5100 or fill out the contact form here.