Early on in the office relocation process, tenants should review their current lease. Lease contracts last many years, and over the years it’s easy to forget contractual obligations which effect the timing and cost of relocation. Before anything else, a tenant should review his lease and re-familiarize himself with the five provisions below.
- Confirm Lease Expiration Date
Tenants should check to make sure that they have the correct lease expiration date. You’d be surprised how often tenants lose track of this important date over the years. Obviously, the exact lease expiration date is essential to know as it will drive the timing of your search process.
- Check for Restoration Provisions
Determine your obligations relating to the maintenance or demolition of your current space. If you have to restore the premises to original condition, be sure to factor the cost and time of doing so into your relocation. Otherwise, a restoration obligation could cause an unexpected expense or delay.
- Review Holdover Penalty
A holdover penalty requires the tenant to pay damages to the landlord if the tenant remains in the space after the lease expires. Damages usually range from 1.5-2 times the normal rent paid. Another reason why it’s important to know your exact lease expiration date.
- Review Extension Option
An extension option protects you from having the landlord lease the space out from under you, if you wish to remain in your current space. Review the lease contract for an extension option and familiarize yourself with the details. Tenants usually must extend at “fair market value.” Ask your tenant representation broker what fair market value is for your space (I’m happy to help, email me at [email protected]). Check to see when you have to give the landlord notice to exercise the option (significant notice is usually required, so check your lease early).
- Review Provisions Requiring the Landlord to Provide Notice & Minimize Disruption to Business
As your expiration date approaches, your landlord will begin to market your space actively. The landlord may begin taking tours through your space regularly to find a new tenant. To keep your business running smoothly, review lease provisions requiring the landlord to provide notice and/or minimize disruption to your business.
Tenants should retain a tenant representation broker early on to make sure that they don’t make any mistakes which can harm the space search and negotiation process. The best qualified brokers will specialize in the tenant’s property type and local market, and will specialize in tenant representation. For more information about Golden Group Real Estate, visit http://goldengroupcre.com/ or contact Troy at [email protected] or (630) 805-2463.