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.