What’s “Fair” in Fair Market Rent?

Here are 5 things you need to consider when agreeing to an option to extend/renew your commercial lease at “fair market rent”:

1. Will there be a “floor”, or can the extension rent only stay even or go up?
2. Is the “market” limited to comparable premises? Comparable buildings? A radius?
3. Should the “highest and best” use be assumed?
4. Will a discount be applied to reflect the value of leasehold improvements or inducements/allowances?
5. If you can’t agree on the extension rent, will the option “die” or should the dispute be referred to an expert?

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.