Renewing a Lease in New York

One of the biggest mistakes tenants make is failing to renegotiate with the landlord at the end of the original lease. According to Benjamin Friedland, a broker with CB Richard Ellis, “You negotiate a renewal the same way you would negotiate a deal the first time around.”
Before any renewal negotiations take place, however, it is imperative for the tenant to hire representation, brokers say (brokers’ fees are typically paid for by the landlord). If a tenant fails to have a broker present in lease negotiations, he will not only forfeit on making any educated amendments to his lease, but he will also be taken less seriously by the landlord. With a broker present, the landlord will realize that there is a high probability of losing the tenant to another property and owner.

When weighing the benefits of a lease renewal or moving to a new space, it is always advantageous for a small business to stay put — as long as the current space meets the objectives and needs of the business.

Joseph Benz, a broker with Metrospire, says, “A tenant is more susceptible to renewing their lease if their space is desirable for their respective business. A fashion-oriented company can’t leave the fashion district.” Not only is moving to a new office an expensive undertaking, but it almost always guarantees lost profits during the actual move. Landlords are also at a disadvantage when a tenant relocates to a new space. Vacant space, work fees and free rent are just a few of the problems a landlord has to deal with when a tenant fails to renew his lease. “Moving is like surgery — don’t do it if it doesn’t need to be done,” says Friedland.

An early lease renewal is an easy solution for tenants who want to remain in their space and secure a lease agreement that captures the fixed increase from the previous lease. Benz notes, “There are more early lease renewals now than in previous years as a result of strong market conditions. I’ve noticed early renewals especially in Midtown South and along Seventh Avenue in Brooklyn.”

While tenants are eager to sign their lease renewals, Benz found that landlords can be eager as well. In one deal Benz dealt with recently, “a landlord went out of his way to negotiate a renewal with the only retail tenant in his building because he didn’t want to lose him to the vacant spaces on the block. He also wanted to sell the building and knew that a building that was 80% vacant would be a bad commercial investment, unless the buyer was the user.”