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Expansion Rights
Practical Law Glossary Item w-015-6290 (Approx. 3 pages)
Glossary
Expansion Rights
Negotiated contract provision that addresses a tenant's potential need for future expansion. Expansion rights allow a tenant to elect to expand beyond the fixed area of the leased premises to other specified areas under the landlord's control. The provision usually specifies:
- The description and location of the expansion space.
- Terms of the expansion, such as:
- rent;
- duration;
- condition of the space when delivered to tenant; and
- limitations on use.
- Triggering events that require notice, such as:
- landlord's notice to tenant that space is available; or
- tenant's notice to landlord that it intends to exercise its expansion rights.
Should space become available, the provision should identify which action is available to the tenant:
- Right of first refusal for the space, where the tenant has the right to match the terms offered by a third party.
- Right of first offer for the space, where the landlord must offer the additional space to the tenant before marketing it to any third parties.
- Predetermined start date, where the tenant exercises the expansion right on a date after the tenant occupying the additional space is expected to vacate.
For more information regarding expansion options, see Practice Note, Options for Additional Space in Commercial Leases and Standard Clause, Additional Space Option in an Office Lease (Pro-Landlord) (NY).