When Should You Start Planning Before Your Lease Expires?

A lease renewal is a negotiation, and your position in it depends on one question: could you realistically leave? If the answer is yes, the landlord is competing with other buildings for your tenancy and has a reason to offer better rent, improvements or flexibility. If the answer is no, the landlord is the only option you have, and the proposal will reflect that.

Landlords and their brokers know how long it takes to find, negotiate and build out a new office. They also know when your lease ends. As the expiration date approaches, they can work out for themselves whether you still have time to move. Once you do not, your ability to walk away has gone, whatever you say in the meeting.

This is why the right time to start has little to do with when the lease ends and a great deal to do with how long a move would take. The start date is the expiration date minus the full time needed to relocate, with margin.

You do not have to want to move for this to matter. Tenants who intend to stay still get better renewal terms when they have a credible alternative and enough time to use it.

We avoid quoting a number of months, because the right lead time varies widely. These are the factors that push it earlier.

• Size. Larger requirements have fewer suitable spaces, longer negotiations and bigger build-outs.
• Specialized space. Server rooms, labs, extra power or cooling, secure areas and hardware workspace all add design and construction time, and reduce the number of buildings that can work.
• Likely build-out. If any realistic alternative would need construction, the schedule must include drawings, permits and building.
• Decision process. Companies that need board approval, investor input or sign-off from a parent company need more time before anything can be signed.
• Tight markets or narrow location needs. If you must be in one neighborhood or near one transit line, options are fewer and take longer to find.
• Uncertain headcount. If you are unsure how much space you will need, you need time to work that out before the search can begin.

A small team in ordinary office space, willing to take a furnished suite, can start later than a company with specialized infrastructure. In both cases, starting early costs nothing, while starting late can cost choices.

Most leases contain several deadlines that fall well before the last day of the term. Missing one can remove a right you paid for when you negotiated the lease. These are the ones to look for.

• Renewal option notice window: if you have an option to renew, the lease will say how far in advance you must exercise it, often within a defined window and in a specific written form. Miss it and the option is normally gone.
• Termination option deadline: an early termination right usually requires notice by a fixed date, sometimes with a payment.
• Expansion, first offer or first refusal rights: these often have their own response periods, which begin when the landlord notifies you.
• Automatic renewal or extension language: some agreements renew unless you give notice to stop them. This is more common in coworking and short-form agreements, but check.
• Holdover terms: the lease will set what you owe if you stay past expiration without a new agreement, typically at a higher rate and sometimes with exposure to damages.
• Restoration and surrender requirements: you may have to remove cabling, equipment or alterations before you leave, and that work needs to be scheduled and budgeted.

The renewal option deserves particular care. Exercising it too casually can commit you before terms are settled, and failing to exercise it can forfeit a right to stay. How and when to use it is a judgment to make with your broker and attorney, not something to decide on the day the notice is due.

Even if expiration feels distant, an hour with the lease and its amendments now will tell you when you actually need to act. Have the full document in front of you, including every amendment and side letter, since later documents often change the dates in earlier ones.

• ✓What is the exact expiration date, as amended?
• ✓Do we have a renewal option? When is the earliest and latest date to exercise it, and how must notice be delivered?
• ✓How is renewal rent set: a fixed figure, a formula or fair market value?
• ✓Do we have any termination, contraction or expansion rights, and what are their deadlines?
• ✓What does the holdover clause say we owe if we stay past expiration?
• ✓What must we remove or restore when we leave?
• ✓Where and to whom must formal notices be sent?
• ✓Is our security deposit or letter of credit due to reduce or be returned, and under what conditions?

Put every date you find into a calendar that more than one person at the company can see. Lease dates are routinely lost when the employee who signed the lease moves on.

Starting early does not mean touring buildings years ahead. It means doing the low-cost work first so the expensive decisions can be made calmly.

1. Abstract the lease: record every date, right and obligation in one summary.
2. Assess whether the current space still fits your headcount, work model and equipment.
3. Forecast what you will need over the next term, with a cautious and an ambitious case.
4. Ask a tenant representative for a view of the market, including what comparable space is offering.
5. Decide whether to pursue renewal, relocation or both in parallel. Running both keeps the comparison honest.
6. Open discussions with your landlord only after you understand your alternatives.

The last point is where tenants most often go wrong. A landlord may call well ahead of expiration with a renewal proposal, and it is tempting to respond on the spot. An early offer is not necessarily a bad one, but you cannot judge it without knowing what the market would give you.

At TAG, we start renewal assignments with a review of the client's lease dates and a survey of alternatives, so that the first conversation with the landlord happens when the tenant still has time on its side.