renewal option

renewal option

A right that may be given to a tenant to continue in the leased space at the expiration of the current lease, on specified terms and conditions. A renewal is a new lease agreement. Contrast to an extension.The difference is important because

1. Oral agreements to extend a lease may be enforceable under the Statute of Frauds, but oral agreements to renew may be unenforceable unless there is some writing evidencing the agreement.

2. A previously agreed upon rental rate for a renewal would indicate adjustment of the base period for the tenant's share of operating expenses to the renewal year, while the same rental rate for an extension would indicate use of the original base year. If the tenant must pay a pro rata share of building operating expenses in excess of what they were in year 1 (first lease year) versus what they were in year 6 (first renewal year), it could amount to a significant amount of money each month.

References in periodicals archive ?
new lease with renewal option at 360 West 125th Street (a second floor office space) that will be used as a boutique dental office for cosmetic dentistry and implant surgery.
The lease provided an initial term of one year and that "[t]he [lessee] shall have the right to renew this Lease Agreement yearly upon the same terms and conditions" Schmidt exercised the yearly renewal option consistently through 2005, when Manchester died and his property was devised to Paulette Carlson Smith.
By negotiating a renewal option past the primary term at fixed rents, the seller/lessee can enjoy below-market rental costs while getting greater potential sublease income.
The law office lease was signed in 1987 with a renewal option the firm exercised in December 1991.
The contract has a renewal option upon successful completion of a review in March 2002.
Because franchises tend to be long-term contracts, the business, economic and competitive conditions prevailing when the renewal option ultimately becomes exercisable may vastly differ from those prevailing when the option was originally granted.
There is no mandatory requirement that a lessee exercise a renewal option in order to renew a lease.
If FM does not exercise the fixed-payment option and X exercises its put renewal option, X can require FM to purchase a letter of credit guaranteeing the put renewal rents.
The Manhattan restaurateur inked a 15-year lease with a five-year renewal option at 545 Fifth Avenue.
The deal will have an initial five year term, with the first year considered to be comprised of 18 months, with five one-year renewable options if no defaults remain uncured at the time of the exercise of any renewal option.
The agreement with Great Plains, which is a privately-owned facility, renews an existing contract for five more years, with an additional renewal option, and involves upgraded service that includes Value-Added's newest feature -- Commissary On-Line Debit, which allows inmates to pay for calls from their cashless canteen system and allows the correctional facility to update the inmates account instantaneously.
The restaurateur inked a five-year lease with a five-year renewal option.