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Arbitration clauses: Commercial leases often contain provisions that include methods of resolving privileged disputes such as arbitration. The reference to arbitration is often found in the extension clauses for setting renewal rents, but what if there is no dispute resolution mechanism in the option to renew the clause in a tenancy agreement? Is that the option to renew the uncertainty? Many tenants think they can save money by not paying to be represented in a rent negotiation. One of the most overlooked clauses in commercial leases is the renewal option. In essence, a renewal option is only an offer with which the lessor agrees to contact in advance if the tenant agrees under the conditions and within the allotted time (Cicinelli v. IwasakiI (1959) 170 Cal. About 2d 58). Owners tend to use form or model language in their leases without paying too much attention to renewal clauses. Invocation of the language of the boiler plate and non-negotiation of lease conditions can result in costly litigation after the initial lease period has expired. Tenants and landlords must have a complete overview of the terms of their extension clause prior to the execution of the tenancy agreement. In order to avoid litigation, the explicit language confirming whether the value of the leasehold improvements is included in the calculation of fair market rent should be negotiated and included in the tenancy agreement.
The negotiation of a commercial lease depends to a large extent on the circumstances. For example, if a tenant needs to make significant improvements to commercial real estate, it may be helpful to negotiate a long-term lease rather than negotiate a short-term lease, which may mean rent increases and less money for improvement. If there are no new conditions and John remains in the apartment, the lease agreement with the renewal option will continue permanently (unless otherwise stated) until it is amended or revoked by one of the parties. John might also say he wants to stay, but might ask to review some terms. The owner may or may not accept these new conditions. If new terms are agreed, a new lease is signed or the old contract is updated and initiated. Given the jurisprudence expressed by Michigan public policy against the granting of implied or explicit rights to the renewal of commercial leases without a contractual agreement, it is important for the parties to negotiate and document the terms in advance. From the rates of extension to procedures related to the exercise of an option, there are a number of issues that tenants and landlords must consider to protect themselves and clarify the understanding of an agreement that may not take effect for many years. Employment and insurance contracts are also cases where a renewal agreement can be important. Some employers may enter into a term contract with a term employee with an option to review and renew agreed upon under the initial recruitment conditions.