The Renewal Notice and the Leverage You Give Away
The renewal option is worth what the tenant can negotiate on the day it is exercised, not the day it is granted.
A renewal option in a commercial lease is a right that decays. The tenant negotiates it at lease up, when the landlord wants the signature, and exercises it years later, when the landlord holds the leverage and the tenant has run out of time to move.
The notice window is the decay. A renewal that must be exercised nine to twelve months before expiration gives the tenant a short runway to find a replacement, and the landlord knows it. We counsel tenants to open the renewal conversation eighteen months out, with a credible alternative in hand, so the notice is a choice and not a surrender.
The rent on renewal is the third variable. Fair market value is whatever the landlord's appraiser says it is, and the lease rarely gives the tenant a say. We negotiate a renewal tied to a published index or a defined comparables set, so the number is not written by one side.
The common area maintenance clause is where a landlord hides the cost basis a tenant will pay for a decade.
A sublease priced to clear quickly can give away the renewal right on the master lease a tenant needs most.