The amendment of an existing lease to extend the term is a common occurrence and is typically viewed as a simple process resulting in a one-page letter agreement confirming the extension of the term and the applicable rent. However, this event provides an opportunity for both the landlord and the tenant to assess their respective positions and to cover important items. This article is intended to briefly highlight certain items that both parties should consider in this context. However, the overriding factor is, as usual, the practical reality of who needs the lease extended the most.

The triggering mechanism for this type of amendment may be to confirm the base rent that the parties have agreed to after the tenant has exercised an option to extend, thereby avoiding the use of a binding appraisal process. However, the tenant may either have exhausted its options to extend or may not have obtained any in the initial lease.

From the landlord’s perspective, the landlord should consider including a waiver of any existing claims by the tenant. During the prior lease term, issues may have arisen between the parties, particularly with respect to any ambiguities in connection with maintenance or repair obligations. The landlord should obviously review its files and discuss this matter with its property manager. The lease amendment process presents an opportunity from the landlord’s point of view to start the new term with a clean slate. Estoppel type provisions in the amendment can also help accomplish this goal.

Secondly, the landlord should review any guaranty of the lease. The original guaranty may not have expressly applied to the option term. Some jurisdictions would narrowly construe such a guaranty. In any event, the guarantors should not only consent to the amendment but should ratify and confirm the guaranty as remaining in full force and effect. This would obviously clarify any ambiguity as to whether the guaranty applies to the new term.

Depending upon the party having the greater leverage, the landlord could also use this opportunity to clean up provisions in the lease that the landlord has found problematic. Candidates would include a use restriction provision that has turned out to be overly broad or otherwise problematic, as well as provisions with respect to modifying common areas, parking ratios, no-build areas and the like.

A tenant may likewise benefit from an audit type assessment of its lease provisions and the shopping center. The tenant, depending upon the leverage involved, may seek to add the exact provisions highlighted in the prior paragraph that the landlord might be tempted to curtail. These would include prohibition against modifying common areas, no-build areas, parking provisions and other operational type concerns. The tenant may also be teeing up its business for a possible sale and may look to liberalize the assignment and subleasing provisions. The tenant may also argue that based upon the tenant’s success in having paid rent during the initial term, there should not only not be any guaranty of the lease going forward, but the tenant might even argue that any security deposit held by the landlord should be released.

As a final item, the parties also need to consider that the typical subordination, non-disturbance and attornment agreement will contain a provision pursuant to which both the landlord and the tenant would have agreed with the landlord’s mortgagee that they will not amend the lease without the mortgagee’s consent. In fact the tenant would be well advised to have the mortgagee not only consent to the amendment but confirm that the SNDA applies to the lease as amended.