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What to Consider When Drafting Renewal and/or Expansion Terms in Arbitration Clauses

By Elizabeth Kluger Cooper and Kimberly C. Jones

Recently, we had the rare experience of having the fair market terms for an expansion go to arbitration. Although successful, navigating through a murky arbitration clause is no easy feat. This difficult experience and serving as an arbitrator has led us to recognize and appreciate the importance of well-drafted lease language. Assuming familiarity with the basics, the following is a list of considerations that should prove valuable whether representing the tenant or the landlord.

Consideration #1: Scope of Market Rent 

Many factors go into the determination of market rent, and the lease should clearly define if just the rent or both the rent and concessions will be determined. Whether any new base year or build-out period is or is not considered should also be plainly stated in the lease. A good example of a market rent determination would be:

"100% of the applicable market rent, taking into account all relevant factors, including, without limitation, if then applicable, rental abatements, brokerage commissions, build-out periods and construction allowances for standard and above-standard construction, and any other then relevant concessions provided to other tenants and other market factors."

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