A lease renewal option provides security by preventing the landlord from removing tenants, but the standard renewal terms often favor the landlord. Tenants should negotiate better terms when exercising this option, such as improved rent rates and other concessions

Negotiating Better Lease Terms

Property owners may not disclose that tenants can negotiate a better deal if they decline their renewal option and renegotiate. With the help of a real estate advisor, tenants may be able to achieve significantly better terms than what is initially proposed. Most tenants blindly exercise the lease renewal option without doing any research or negotiating, assuming that the terms are fair or good enough. This approach can lead to lost opportunities for recapturing excess expenses over the lease’s length, costing tens to hundreds of thousands of dollars.

Before you sign your lease renewal, consider the following:

• The terms in the renewal option rarely favors the tenant.
• Most leases include an annual escalation clause that creates a lease rate that is almost always well above the current market value at the end of a lease term.
• Most renewals are rich deals for property owners. Landlords make much higher margins on a renewal with an existing tenant, compared to a new lease by keeping rates above market and offering minimal concessions to sign the renewal.
• As a tenant, getting an expert in your corner will result in more favorable lease terms and will save you money.

Get the Best Lease Renewal Deal

To ensure you’re getting the best possible terms on your lease renewal, it’s essential to hire an expert to exclusively represent your interests and develop a customized strategy to procure your next lease and evaluate all of your options. With the right approach, it is very common to negotiate terms that are more favorable than what is initially proposed. At RMI Healthcare Real Estate Advisors, we only represent healthcare tenants and buyers, so you can be sure we have your best interest in mind.

Landlords Benefit from Renewal Terms

Landlords work hard to protect themselves and the lease renewal terms reflect that. The lease rate of a renewal option is often higher than what they would charge a new tenant for the vacant space. When an existing tenant agrees to renewal terms without negotiation, they leave money and concessions on the table. The playing field is not level and the bottom line is that tenants need an expert in their corner to understand all of their options and better prepare for the future. Visit our website or contact Eric today to learn more.