Appraisals For Commercial Lease Extensions: A Step-By-Step Guide

It's near the end of your commercial lease, and the tenant jumped through all of the hoops (which are strictly enforced) to extend the term for another five years. Previously, the rent was not an issue; the tenant paid minimum base rent and, perhaps, a percentage of sales rent. The amount of rent was explicitly agreed upon for that first term of the lease. So, how is the rent determined for the option period?

Some leases, of course, provide that upon the exercise by the tenant of another lease period, the base rent increases by a certain percentage or in accordance with some other numeric formula or calculation. However, many times, the parties agree that the tenant will pay the fair market rental at the start of each option period. If the parties cannot agree as to what that rental is, then they may agree that one or more third-party appraisers determine that amount.