One of the biggest issues in all of commercial lease negotiations are termination options. Lessees want them, lessors fear them, and commercial real estate agents don’t want to have anything at all to do with them. The reasons why are based in common sense.
- Property lessees want to keep the option open to terminate their lease agreement at any time and are willing to pay extra money to leave that option open. Still, it’s not something that’s commonly agreed to by landlords, and commercial real estate agents resist them.
- Landlords view breaking a lease agreement in a wholly negative light and are frequently resistant to negotiate this into the terms, even if it results in a deal killer. The fact of the matter is that the landlord’s lender gets to approve any meaningful lease, and if there is a provision that will affect the landlord’s ability to pay its mortgage, the lender will likely not approve the lease.
- Traditional commercial real estate agents see negotiating the ability for a tenant to terminate a lease agreement as counterproductive to their personal goals of earning a living. Working a termination option into a lease can have a significant negative impact on the commission of a commercial realtor, as it can impact the fees they earn by as much as half.
So what does a tenant have to do in order to gain the option to terminate their lease agreement? Short of hoping against all hope, tenants have to align themselves with a commercial real estate brokerage that pays their agents based on performance. Although finding such an organization can be on a par with finding the Holy Grail or hunting down Bigfoot, there are tenants who have been able to accomplish this task. As a result, they’ve emerged from negotiations with a renewed perspective on what the relationship between tenant, landlord, and commercial real estate broker can be about, and what they can result in: a mutually beneficial solution for everyone involved.