When a tenant is leasing commercial space, it may wish to
reserve the right to secure its tenure beyond the initial term of
the lease. Typically, this is achieved by the landlord providing
the tenant with an option to renew or extend the lease
("Renewal Option").
Enforceability of Renewal Options
For a Renewal Option to be enforceable, it must provide for all
essential terms being:
(i) parties;
(ii) the length of the term ("Renewal Term");
(iii) premises;
(iv) rent ("Renewal Rent"); and
(v) any other essential terms.
Failing agreement on those elements, the Renewal Option would be
an "agreement to agree" and not enforceable.
Accordingly, to be enforceable, the Renewal Rent must be fixed
or objectively ascertainable. To be ascertainable, it is common
that the Renewal Rent, if not fixed, be based upon "fair
market rent for comparable premises in the same market area as the
leased premises to be agreed upon between the parties." Note
there are two
