LEGAL ADVENTURES OF THE CLARKE FAMILY
Chapter 3 - LEASE AND OPTION TO RENEW
As the year draws to an end, Dave realises he needs to start thinking about his shop lease and whether he wants to remain in the same location or if he wants to move to a new location.
He calls E Berman & Co to ask them to take a look at the current lease and asks for advice, and a few days later they call back to give their advice to Dave.
“The lease has an option to renew, but you need to contact the landlord urgently to exercise the option to renew the lease. Unfortunately I think you are too late as the period to exercise the option has expired. The landlord does not have to renew it.
Dave is shocked and decides to discuss the position with Maggie, who says:
“It’s probably better if we renew our lease and stay in this location since we’re doing well and have already established a solid reputation with the local people.”
Dave thinks this is a good point and calls the landlord the next day to exercise the option to renew the lease. However, when he calls the landlord says
“You need to exercise your option in writing and in time as it states in the lease or I will not be required to renew the lease.”
The landlord knows he can get a better rental with a new tenant.
Dave is very upset and after checking with E Berman & Co he discovers that he should have exercised the option in writing.
For what it is worth he immediately sends an email to the landlord to exercise the option to renew the lease.
The next day Dave receives an email from the landlord that says
“Mr Jenkins I will agree to a new lease but the rent will be increased by 15%”
If there is an option to renew in a lease it is essential you exercise the option by notifying the landlord in writing by the date stipulated in the lease, which is usually 3-6 months before the expiry of the lease.
When entering into a new lease you don’t have much to lose by negotiating an option which could be essential down the track.
Q and A
Q: My lease doesn’t contain an option clause. Can I still renew my lease?
A: No, if your lease doesn’t contain an option clause it is not possible to renew your lease. You will need to approach your landlord and begin negotiations to enter a new lease but the landlord may not agree.
Q: What are the benefits in having an option to renew in my lease?
A: For the landlord, an option clause means that it is likely they will have the possibility of financial security down the track with a reliable tenant. For the tenant, this is beneficial as they may need the premises to maintain the goodwill with their existing and new customers by remaining in the same location.
How can E Berman & Co Solicitors help me?
E Berman & Co Solicitors is a Chatswood law firm that has been providing quality legal services to the public since 1984. Contact our office on 9412 2493 – we’re more than happy to have a quick chat! You can also visit us on our website for more information.
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