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Landlord Tenant Law

Easy As FMV: Modern Fair Market Value Renewal Methods

This article discusses the competing interests and criteria of landlords and tenants in defining fair market value, explores various mechanisms used for resolving disputes over fair market rental rates, and concludes with proposed language that represents a healthy compromise for both sides.

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The owner of a local business wants to lease commercial property to use as a retail storefront or for office purposes. When she finds her ideal space, the landlord suggests an initial 10-year term. The potential tenant envisions staying in the space longer than that, so she wants to negotiate for the option to renew the lease at its termination. However, the landlord is reluctant to agree on a fixed amount of rent for the renewal term, as market conditions will undoubtedly change over the course of a 10-year period. So, how will the parties agree on the future rental amount?

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