How Much Should It Cost To Kick-Out Of A Lease? Not As Much As Is Being Asked.

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Today, we’ll start in the middle of our thoughts by opening with an example that we’re going to return to several times in this week’s posting. You can have a five year lease with an option (in favor of the tenant) to extend its term by five years, or you can have a ten year lease with the tenant having the option to end it at the five year point. In fact, you can do those numbers any way you want. So, what’s the difference?

Psychology aside, probably nothing if the math wizards are at work. Perhaps, one party or the other can play around with the tax treatment given to the lease. But, basically, the present value for each five year segment should be the same. If someone were to suggest that having the right to terminate the lease early protects a tenant against [Read more…]

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