Renting commercial space is often a startup decision. Entrepreneurs may not have the resources necessary to qualify for a loan. They may also want flexibility in case the company grows rapidly, struggles initially or eventually changes function.
A commercial lease can provide cost control and commercial space access for years with the added benefit of being able to relocate in the future if necessary without selling the property. In some cases, those leasing a space may eventually intend to acquire commercial property. Those tenants may want to consider asking a landlord to extend them the right of first refusal when they negotiate lease terms.
What is the right of first refusal?
The right of first refusal is essentially a contract clause extending specific rights to one party. In a real estate rental scenario, the right of first refusal creates an opportunity to make an offer on the property before the owner lists it for sale.
A tenant with the right of first refusal can make arrangements to acquire real property at the current fair market value without competing with other buyers. They also protect themselves from a scenario in which the space that they have occupied for years becomes unavailable when the new owner refuses to renew the existing lease.
The right of first refusal can take some of the risk out of investing in the property during the lease. If the owner attempts to sell the property to an outside party without allowing the tenant to make an offer, then the tenant could ask the courts to intervene for their protection.
Negotiating appropriate terms in a commercial lease can make a major difference for both tenants and landlords. Unique terms can make renting as beneficial as possible for both parties.
