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 ?
Contract award notice: Supply of drugs needed by the healthcare authorities of the liguria region and the autonomous provinces of trento and bolzano, For a period of 24 months (renewal option for an additional 12 months) (italy-genoa: Various medicinal products)
The Bank of America lease has an initial expiration in 2028, with one 10-year renewal option and two five-year renewal options.
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.
Additionally, the lease provides four renewal option periods of five years each, for a total of 40 years.
Target has a renewal option, exerciseable by the end of January '05, to extend the license two years beyond its current January '06 expiration.
The new 3,800-square-foot studio at Eighth and Folsom Streets carries a five-year lease with a five-year renewal option and has been renovated with a $150,000 grant from the William and Flora Hewlett Foundation.
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 agreements with Chautauqua Airlines and Republic Airlines will expire in 2014, while the agreement with Shuttle America will run through to 2005 and includes a renewal option.
The law office lease was signed in 1987 with a renewal option the firm exercised in December 1991.
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.