Perpetually Renewable Leases

Options to renew in a commercial lease typically give the tenant the right, on written notice, to renew the lease for a specific period "on the same terms and conditions" as the lease, except for the renewal rents and the inducements initially provided to the tenant, and except for the exercised option to renew, thereby ensuring that the tenant will not acquire an additional renewal option to renew. Insufficient attention to the terms of the renewal option may lead to unintended consequences.

We were recently asked to review various leases of premises within a potential redevelopment site. Some of the leases did not contain a "demolition" clause (i.e., a clause allowing the landlord to terminate the lease and demolish the building), which was troublesome in itself. In addition, a handful of the leases contained poorly drafted options to renew that effectively granted the tenants a perpetual right of renewal. This left the landlord with no ability to redevelop the site