The Optimal Time to Renew Your Lease

Determining the optimal time to renew your lease can be challenging. On one hand, your lease has a built-in deadline by which you must renew to retain your rights to your option, and it’s important that your critical date management systems keep track of this date. On the other hand, market conditions could make it advantageous to renew earlier. The rule of thumb is that it’s best to renew when your landlord needs you more than you need him, but finding that exact time can be challenging.

During Your Lease Term

Just because your lease is in the middle of its term doesn’t mean that you can’t renew it. You just need to find a reason that is in your landlord’s interest to negotiate with you even though it isn’t technically necessary. Here are a few situations wherein this idea can be applied:

1. Impending building sale. Many owners try to stabilize their rent rolls before they sell their buildings. While they might not be willing to reduce your rent, they could be willing to let you lock your rent in for a longer period of time, and you might be able to negotiate a few months of free or partially abated rent in exchange for a renewal.
2. Major new vacancy. When buildings experience major vacancies, owners frequently want to sure up the rest of their rent roll to ensure that the do not end up with a completely vacant property. Your negotiating position can be extremely strong if your lease contains a co-tenancy or “go dark” clause that would otherwise allow you to vacate the property.
3. Market changes. If changes occur in your market that could make your landlord’s position weaker, you can also exploit it to negotiate a longer and more favorable lease. Changes like new competing developments, increased area vacancy or decreasing area rents could all make your landlord excited to lock you in for a longer period.

Early in Your Notification Period

If you don’t like to draw your negotiations down to the wire, you can also contact your landlord to renew your lease when your critical date management system informs you that a renewal is due. For example, this would occur at the six-month mark if your renewal option is available from three to six months before your lease term expires. Beginning the lease renewal period as early as possible has a few key advantages:

1. It curries goodwill with your landlord that you might be able to leverage into a better negotiated solution.
2. It eliminates the risk of waiting too long and losing your window to renew your space.
3. If your initial negotiation doesn’t go well, you will have a good deal of time to continue working to find an acceptable solution for both you and your landlord.

Near the Drop Dead Date

As long as you have a properly-configured critical date management system in place to ensure that you don’t wait too long, waiting until the last second has some significant negotiating advantages. Putting off a decision until the last second weakens your landlord since they will not only be worried about losing you as a tenant but also worried about not having enough time to replace you. However, the risk you take in using this strategy is that your landlord could choose not to renew your space. In this instance, you could end up without adequate time to move your business. As such, this strategy is best used if you have an acceptable alternative. That way, your worst case scenario is that you move to a space that you like as much or better. Note: This is the least recommended way of handling these types of situations. Researching alternatives is always best done with plenty of time to make a decision on renewal options.