Either way, the landlord need not sacrifice returns to provide the tenant the flexibility it needs in an uncertain market. The most common lease term today for technology companies is 10 years. Some tenants negotiate for the right to terminate at an earlier pre-determined date or occurrence of a triggering event. Although landlords may naturally be disinclined to a provision permitting a tenant to terminate early, it may actually serve the landlord well to bid farewell to a tenant if it has been unsuccessful and is likely to become a nuisance though defaults, bankruptcy, or other financial demands, or if rental rates in the building's market have increased. The lease should provide that the vacating tenant pay a predetermined termination fee designed to recapture the landlord's unamortized costs from the original transaction and even some of the costs or reletting the premises.
Reasonable notice is also essential.
Tenants will want to provide such rights expressly in the lease. The lease should provide a window during which the tenant must exercise its extension or renewal option, and exercise of the option should be conditioned upon the absence of default both when exercised and when effective. From the landlord's perspective, the window for exercising the right should be far enough in advance so that if it is not exercised, the landlord will have sufficient time to market and relet the premises. The tenant, of course, will want the window nearer the end of the term to remove some of the uncertainty over future space needs. A reasonable compromise will usually be nine to 12 months before the end of the term.