Some rental contracts now have a place for tenants to place their initials through arbitration. Would the courts consider this to be a separate agreement? It still needs to be tested in California. Typically, a renewal option allows a tenant to extend a commercial lease for a specified period, in accordance with the terms of the original tenancy agreement, with the exception of renegotiating the renewal period rent on the basis of a «fair market rent.» The concept of «fair market rent» is often not or very well defined in many commercial leases. Both the landlord and the tenant must take the time, at the beginning of the tenancy agreement, to carefully define the term «fair market rent» from their point of view. The wording desired by the landlord and advantageous to the landlord can be formulated in the way desired by the tenant and advantageous to the tenant. The issues that should be considered either by the lessor, the tenant, or to establish a fair market, are whether the rent of the renewal conditions is in accordance with the improved conditions (i.e. originally) of the premises, at the time of assessment, geographic extent and the use of comparable real estate (e.g., same building). B, equal road, same city, same mode of use (for example.B. , retail areas compared to a restaurant), the strength of the tenants` association (for example. B a strong retailer compared to a start-up restaurant) and whether to consider potential incentives for renting. This will concentrate negotiations and give clear parameters to an arbitrator if no agreement is reached. The parties are not limited to a single compromise clause in the lease agreement. A separate arbitration agreement that uses the adaptability of arbitration can provide a much more detailed roadmap for the implementation of arbitration than can be included in one or two clauses of the lease.
An arbitration agreement should be established at the time of the dispute (given that some arbitrators want their own form of arbitration agreement). If one wants the security of arbitration at the time of the first conclusion of the lease, then a more detailed compromise clause, which describes this process in the lease agreement or in an appendix to such a lease. This will result in increased costs in advance, but can avoid tactical wrangling in the event of litigation. A commercial lease should be verified by your lawyer and certain conditions must be negotiated to fit your business.