Does the song sound familiar? Well, it is a tune every tenant should be singing – twice a year. That is right. Every tenant should check their lease expiration date twice, and make sure to start their search at least a year in advance. Wondering why? Does not a year sound a bit over the top? If you are a small company leasing a very small office space, a year might be overkill – but any company over ten employees needs that year, if not a little bit more.
Let me share a story with you to illustrate my point. One of our staff members was at her doctor’s office recently when she overheard the receptionist talking to their landlord. Once she was escorted into the exam room, she asked her doctor what was happening. He replied that they were in the process of renewing their lease. She offered to for Compass Commercial to step in and help. Upon reviewing the lease, two things jumped out at us: first, the lease had expired three months ago, and second, the rent was substantially over market.
There was no time to waste! We made arrangements for the doctor and his partners to look at alternative spaces right away. Just a few days later, we called the landlord’s broker to discuss. While we were told that yes, the tenant was free to move, the lease called for a 200% holdover – and the landlord fully intended to charge that additional rent. The overall savings on relocation would have far exceeded this amount, but the tenant decided to renew, as a $10,000 bill was too much to pay all at once.
Here is the thing: the landlord played this out on purpose. It was a business tactic, and it worked. The tenant is now stuck paying 25% above market rate for five years. Next time his lease comes up, I would bet he will have the date set in his calendar a year in advance, ready and willing to start his search early so that he does not find himself in this situation again.
In short, when it comes to lease renewals and even new leases, make like Santa: check your expiration date twice, and mark it down in permanent ink on your calendar. Otherwise, you too run the risk of getting stuck and having to overpay on your rent for the next five years.