NOTICE OF EXERCISE OF LEASE OPTION

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At a Glance

Ensure clarity and compliance when exercising a lease renewal with a professionally drafted Notice of Exercise of Lease Option. This essential legal document helps tenants, landlords, and legal professionals formally confirm the extension of a lease under the terms of the existing agreement, mitigating risks and ensuring transparency.

✅ Free Checklist: Acting for the Lessee • ✅ Free Checklist: Acting for the Lessor • 📘 Free Legal Drafting Booklet

How do I exercise an option for a commercial lease?

There is no prescribed form for the exercise of a Lease. It should be done in writing.

Most lawyers use a custom-made form which they ask clients to sign. This is done
for several reasons:

1. An official looking form is less likely to be ignored. An email requesting the exercise of an option is more likely to overlooked or mistaken for routine correspondence. In some leases notice by email is not sufficient. ‘Notice in writing’ often means a piece of paper with an original signature on it.

2. Asking clients to sign is a way of confirming their instructions to exercise the option. If they later forget then you have the signed Notice as proof of their instructions.

3. Exercising an option and then not taking it up could spark a legal battle about payment of the landlord’s costs and damages for lost rent. Even though the landlord may not be entitled to charge costs (as in leases under the Retail Leases Act) and it is the tenant’s choice not to proceed, there have been cases of desperate and/or greedy/misinformed landlords trying to claim their costs from tenants.

Advise clients on the pros and cons of exercising their option (being careful not to stray in the territory of giving financial advice) and suggest they shop around for a better deal before making their decision.

In advising on lease options it is especially important to keep file notes. If your client instructs you not to exercise the option, make a file note to that effect, reminding your client that you are not obliged to give them further reminders. A letter confirming their instructions is a great idea for all the reasons mentioned above.

INCLUDES

This Download Includes

 

  • letter to lessee client advising on Notice of Exercise of Lease Option
  • letter to lessor enclosing Notice of Exercise of Lease Option
  • letter to lessors managing agent enclosing Notice of Exercise of Lease Option and requesting variations
  • letter to lessors managing agent enclosing Notice of Exercise of Lease Option
  • Notice of Exercise of Lease Option

 

 

Key Components

 

  1. Parties Involved: Identification of the landlord (lessor) and tenant (lessee), including names and contact information.
  2. Property Description: Detailed description of the leased property, including the address and any specific identifiers.
  3. Lease Reference: Reference to the original lease agreement, including the date of the lease and any relevant sections or clauses that outline the option being exercised.
  4. Option Being Exercised: Clear statement of the specific option being exercised (e.g., lease renewal, extension, purchase option) and any relevant terms.
  5. Effective Date: The date on which the tenant intends to exercise the option and any relevant timelines or deadlines specified in the lease.
  6. Acknowledgment of Terms: Acknowledgment that the tenant agrees to the terms and conditions associated with exercising the option, as outlined in the original lease agreement.
  7. Signature: Signatures of the tenant and, if required, the landlord, to acknowledge receipt and agreement.

 

 

Advantages

 

  1. Clarity and Documentation: Creates a clear record of the tenant’s intention and the landlord’s acknowledgment, reducing the potential for misunderstandings or disputes.
  2. Legal Protection: Ensures that both parties are aware of and agree to the exercise of the option, providing legal protection in case of any disagreements.
  3. Timely Notification: Helps ensure that the tenant exercises their option within the required time frame specified in the lease agreement.

 

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