WHAT TYPE OF EXPANSION MAKES THE MOST SENSE? 

·RIGHT OF FIRST OFFER  Tenant has the right to lease the expansion       premises on terms offered by the Landlord.  If Tenant does not do     so, the Landlord can take the space to the market on terms not     materially more favorable than those rejected by the Tenant.
·RIGHT OF FIRST REFUSAL Tenant has the right to match a third party offer  for the expansion premises.
·MUST TAKE SPACE  Expansion space is automatically incorporated into the leased premises on a certain date on pre-negotiated terms and conditions.
·MAY TAKE SPACE Tenant has the option to incorporate expansion space into the leased premises on a certain date on pre-negotiated terms.

KNOW WHEN AND HOW TO EXERCISE THE OPTION TO EXTEND. 
If the Tenant fails to exercise the expansion option in strict accordance with the negotiated terms, the Landlord may not have to honor the expansion option. Remember - expansion options really favor the Landlord.  Keep an eye out for form of notice, timing of notice and notice recipients.

CONFIRM THE RENTAL AMOUNT. 
In order for the expansion option to be enforceable, the rental rate for the expansion space must be clearly stated in the lease or a mechanism for determining the rental rate must be set forth in the lease.  Also, consider whether the base year for operating expenses for the expansion premises should be the base year being used for the balance of the premises or the base year at the time of the exercise of the expansion premises.

KNOW THE RAMIFICATIONS OF THE TERM. 
Is the expansion space coterminous with the balance of the original leased premises, or is it for a separate period of time?  For the most part, it is in the Tenant's interest to have the lease term with respect to the expansion premises be coterminous with the balance of the original leased premises, but note that as a result of having a shorter term for the expansion space, the Landlord may require that any non negotiated tenant improvement allowance be prorated over the balance of the remaining term and in such event, the Tenant may have to fund a greater portion of the build-out for the expansion space than they did for the build-out of the initial premises.

CONTRACTION.
Contraction options need to be negotiated early.
Contraction options rarely benefit the Landlord.

KNOW HOW TO NEGOTIATE THE CONTRACTION OPTION. 
As already stated, just as with expansion options, Landlords do not appreciate contraction options. If the Tenant fails to exercise the contraction option in strict accordance with the original terms of the lease, the Landlord may not have to honor it and the Tenant will be forced to continue to lease such space.
 
KNOW WHAT THE TERMINATION FEE IS. 
 
Fees can include:

·   Unamortized brokerage commissions
·   Unamortized tenant improvement allowances
·   Free rent
·   Rent for the anticipated time required to re-lease 
     the premises (pre-negotiated)

BE PREPARED FOR POSSIBLE LOSS OF SPECIALLY NEGOTIATED RIGHTS IN THE LEASE.
If a Tenant shrinks, the Landlord may cancel items such as:

·  Renewal options
·  Expansion options
·  Building or monument signage
 
The Landlord may also include:

 

·  Relocation clauses
·  Reserved parking
·  Any other amenities or concessions