Lease Expiring? Here's what to do (and not do)

With your lease expiring, should you move to another location or renew your lease for another fixed period? Costing you time and money, either decision will impact your business. These are the do's and don'ts to consider if you’re not sure whether moving or staying is right for you.

Do Give Yourself Ample Time

Compare the pros and cons of lease renewal vs expiry six to nine months before your lease is up. Having ample time to renegotiate with your landlord puts your company in an advantageous position.

Conversely, renewing your lease too late could negatively these discussions with your landlord. They’ll recognise that your options at this late stage are dwindling and know that you won’t have much choice but to agree with rental terms that favour their interests.

You could also find yourself paying more rent than you can afford and agreeing to bad terms which impact your bottom-line and business performance.

Do Your Homework

Content or not with your current lease and landlord, market research is essential for exploring your options and learning what's out there. You’ll also become aware of your rights and demands as a tenant, and discover whether you have a good deal going where you are currently.

Of course, market research is a time and labour-intensive task for many business owners, which is why many hire a tenant advisor to do the difficult legwork.

Armed with extensive market knowledge, a tenant advisor can help business owners decide whether a current commercial leased property fits their business goals. They’ll advise whether a lease renegotiation makes financial sense and ties in with a company's plans for expansion.

Content or not with your current lease and landlord, market research is essential for exploring your options and learning what's out there.

Do Consider Your Plans For The Future

The workspace you're currently in might accommodate your current size requirements, but will its square meterage satisfy your business demands down the line?

Either moving will be the most sensible option in planning for the future or an unnecessary, costly and wasteful expense.

Do Contact A Tenant Advisor Anyway If You've Left Things To The Last Minute

Skilled tenant advisors are more than highly skilled market researchers; they also represent their clients.

Even if you've entered into lease renegotiation late with next to no bargaining power, a tenant advisor can still help and provide support in talks with your landlord. Having worked with tenants and landlords, a tenant advisor understands what motivates both sides and can advise accordingly.

Do Acquire Legal Aid If Necessary

If the cessation of your lease has been met with a difficult landlord or unforseen issues, it helps to get legal support to end a lease relatively amicably.

Don't Be Afraid To Negotiate

If you're in a convenient location and choose to renew your lease, don't be scared to negotiate better terms with your landlord even if things are fine as they are.

Market research might have revealed that you're at a disadvantage, paying higher rentals than nearby offices while receiving less impressive accommodation, incentives, perks and support amenities.

Considering the fact that your landlord benefits from a longer tenancy because it costs them less, they’ll want to keep you on. Rather than securing new tenants, your landlord might be willing to make changes, like sprucing up the workplace and lowering the rent. The ball's in your court, especially if you initiate renegotiating early.

If you're in a convenient location and choose to renew your lease, don't be scared to negotiate better terms with your landlord even if things are fine as they are.

Do Consider The Cost Of Relocation

The biggest consideration in deciding to renew your lease or letting it expire are the involved costs.

Moving somewhere cheaper might be lighter on your wallet, but you must also account for the pricy move and fit-out costs.

Choosing to stay might come with a higher rent that's justifiable if the premises continues to serve your business needs and demands. As the adage goes, the grass isn't always greener on the other side.

In the same vein, transferring offices might initially cost you more money but could be the best economic decision for your business in the long term.

...transferring offices might initially cost you more money but could be the best economic decision for your business in the long term.

Don't Assume Your Lease Will Be Automatically Renewed

If you intend to stay, check your lease's fine print to see if renewal is even possible. Remember that landlords aren't obligated to renew a lease, nor do they have to provide a reason for terminating one, so you could find your business homeless if you haven't explored other options.

Do Look Into Holdover Provisions

In COVID times where office demands are at an all-time low, landlords wanting to increase their cash flow are sometimes happy for renters to go month-to-month.

This gives tenants additional time to find an alternative office space if they or their current landlord aren't interested in renewing the lease.

"Rental holdovers" can also be high risk because landlords have it in their power to give short notice periods - from a month to as little as seven days - without explanation, leaving businesses unprepared for moving out.

Don't Disclose Your Bottom Line and Company's Successes

Even if you have a great and long-standing relationship, be careful about revealing sensitive information like profit increases to your landlord.

While you might be on good terms, your landlord is a business person like you and will want to profit off your profits by raising the rent, knowing you can afford the additional expense. If you're a long-term renter, you might find it easier to pay out extra to avoid the inconvenience of moving.

Even if you have a great and long-standing relationship, be careful about revealing sensitive information like profit increases to your landlord.

Do Ask For Your Security Deposit

While a tenant can't have their security deposit back before a lease expires, they are legally entitled to receive it within a certain time frame when it does.

However, there are legally-binding stipulations that could prevent you from recovering your security deposit. If there's damage to property your company is responsible for that exceeds ordinary wear and tear conditions, the deposit is likely to be forfeited or reduced. This might also apply to making alterations where some landlords might not even give permission for minor adjustments made to the premises.

Painting the walls or making well-intended cosmetic changes can result in you not getting your full deposit returned.

Take note, though, that a landlord can't arbitrarily reduce your deposit without providing you with an itemised list of things that need to be fixed, replaced or refurbished.

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