How Long Should My Commercial Lease Be?
Originally Published : May 7, 2013
One question that comes up quite often in discussing commercial leases, in particular restaurant leases or retail leases, is exactly how long should the lease be for? While the industry standard for a restaurant lease is ten (10) years for the initial term with a five (5) year tenant’s option to renew, we typically suggest to our clients that they request a lease term that is as long as possible. A commercial lease should be seen as an asset, and if the terms are good it can be quite valuable. We always want our clients to succeed and maintain their business for a long time, but if a tenant has to sell their business, a longer lease is more attractive to potential buyers.
It is also important to note that any option to renew the commercial lease should be in the tenant’s sole discretion. This means it would be the tenant’s decision if they want to extend or renew the lease at the end of the initial lease term. If the option to renew is up to the discretion of the landlord, the landlord has the ability to block the extension, essentially making the option worthless.
It may seem scary to have a long lease at the start of a business, but there should be several options built in to the lease terms to allow the tenant to get out if the business is not going well. These options include the right to assign the lease, and what is known as a “Good Guy Guaranty.”
If you have any questions about these issues, you should contact a New York small business attorney or restaurant attorney. We are very sensitive to our clients needs in these areas, and are always happy to discuss such issues.