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Effective Lease Term Renewal Negotiation

No lease, no premises, no practice.

Remember that your lease controls how long you can practice in the premises, your rent cost, the value of your practice and your retirement fund. Therefore, your lease and its terms are critically important.

Your lease was carefully negotiated years ago to provide terms and conditions to protect you and your clinic. Time has passed and now lease negotiation is very different than it used to be.  Mishandling your lease term renewal will give your landlord the negotiating advantage which could result in high rent, negative lease amendments, or even the loss of  your lease – And the closure of your practice!

Tenants need to understand the current leasing environment and update their thinking and approach to lease term renewals.

In the past, it was a tenant’s market. There was an abundance of vacant real estate in most markets providing a strong tenant leverage position which resulted in favorable lease terms, conditions, and relatively inexpensive rent. The value of real estate compared to other investments was low and therefore, the value of rent was low. Many landlords were not technically sophisticated and did not understand the implications of many lease terms or conditions, or the value of certain lease provisions such as termination for demolition or relocation clauses. Leases and their clauses were simple, clear, and easily understood. “Negotiation” amounted to a 20-minutediscussion over coffee, a handshake, and a signature.

Today’s market is a landlord’s market. In many areas, there is no available real estate for lease. Landlords understand the value of their investment grade real estate. Now, landlords are sophisticated ;many have advanced education. Leases are sophisticated. Landlords have the leverage position to dictate rental rates and all lease terms and conditions.  Therefore, the landlord can control your lease, your premises, and your practice. “Negotiation” can amount to 113 emails, 42 unanswered calls and a final answer which could be “no”.

There is light on the horizon, but tenants must take their lease term renewal very seriously and have realistic expectations. A properly handled lease term renewal in this market can still result in a reasonable rent with lease terms and conditions in the tenant’s favour, preserving the tenancy and value of the practice.

The key to achieving successful lease term renewal negotiation is to methodically plan the strategy to administer your lease term negotiation.  

1.       First, tenants need to establish a negotiating position by having a lease review completed to understand lease terms and conditions including the critical timeline. Over looking one issue could cost them the value of the practice.

2.       Second, based on the lease review, tenants must define needs including adding options to renew, setting fair market rent, adjusting assignment provisions, finessing early termination and relocation provisions etc. Failure to understand subtle nuances could cost the value of the practice.

3.       Third, tenantsmust assess and understand the real estate market to know what available, and fair market rent is. To be unaware of even one opportunity could make the difference between and successful and unsuccessful negotiation.

4.       Fourth, tenants must administer the lease term renewal negotiation timeline properly. The process includes understanding and administering both the lease term and option timelines in the context of the renewal option language expressed in the lease. Tenants should also understand when to approach the landlord to avoid inadvertently derailing an otherwise successful negotiation.

5.       Finally, tenants must know when and how to approach and negotiate with the landlord. The days of doing it yourself are over. Anything besides being professional, persistent, personable, patient, and realistic will have significant negative results for you. Your representative must be experienced enough to understand the difference between an institutional leasing manager and a developer and understand what the landlord’s needs are and how to integrate landlord needs with the tenant needs. Talking to the wrong person at the wrong time with the wrong attitude will result in an unsuccessful negotiation.

The key message, here, is in a lease term renewal negotiation you don’t get what you deserve, you get what you negotiate. You can’t do your own lease term renewal anymore. What you don’t know can and will hurt you. Lease term renewal negotiation has become a specialized field and as such, you need to hire an experienced and competent professional. You can’t afford not to.

Our services will save you time and money, while protecting your interests.

Contact Realty Lease Consultants Inc. at 705-743-1220 or email for Stress-Free Lease Solutions!

Written by
Ian D. Toms & Jennifer L. Madgett