What is the Difference Between Renewal and Extension of Leases

Many leases provide the tenant with an option to renew or extend the lease term beyond the expiration of the initial term. While renewals and extensions have similar practical effects, there are some nuanced differences.
By definition, a lease renewal is a new lease agreement, whereas a lease extension is a continuation of the original lease agreement. Generally speaking, the practical effect of either is that the parties to the lease continue the landlord-tenant relationship beyond the expiration of the original term of the lease. It is important, however, to consider how a lease renewal or lease extension might affect other promises and covenants in the lease agreement.
For example, if the lease agreement includes landlord lease concessions (e.g., first month’s rent is free or landlord to contribute money toward the tenant’s build-out), a renewal of the lease may be interpreted to require the landlord to provide all these concessions again.
Similarly, if the lease provides either party with rights that have expired (e.g., the tenant has the right to terminate, without cause, during the first six months of the lease), these rights will also arguably be renewed.
The distinction between a lease renewal or extension may affect other rights under the agreement. For example, if the lease is assigned by the tenant during the original term of the lease, a subsequent renewal of the lease may cut off any remaining liability of the original tenant to the landlord.
Additionally, if a breach occurs that would give the landlord the right to terminate the lease, a lease renewal may prevent a landlord from exercising this remedy.
Another distinction is that, a renewal requires the execution of a new written lease. On the other hand, an extension requires nothing more than an action by the tenant, according to the terms of the existing lease, to indicate an election to extend the lease.
Parties to a lease agreement containing “renewal” or “extension” language, are well-advised to pay attention to which term is used and, as always, to seek legal counsel about their legal rights under the lease agreement.

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