Lease Options-Locking in the rate today.

Tenants often want to have an option to renew stated in their primary lease. In this difficult leasing environment, many tenants are pushing hard for low rates in their primary lease today and also low rates in their options to renew in the future. Some landlords are so desparate to lease their vacant space today that they are reluctantly agreeing to the low option rates when the tenants renew in the future. On the surface, this may seem like a win for the tenant. However, the owner can usually only go so long with low rent before the funds start to run short. This means that the landlord may not have the funds to make capital improvements to the property when they are needed. The driveway, roof, and mechanicals may not get replaced at the end of their useful life. Usually the tenant ends up paying for the repairs to these items in their lease either as part of the NNN costs or through above the base year reimbursements. As the building and grounds get older, the repairs can really start to add up. In reality, the building and grounds could suffer and the tenant may end up paying more in rent than they initially thought and also have to live with a property that is looking subpar.

Squeezing the landlord a little is expected in a down economy. However, choking the landlord is never good for either party.