An option to renew is a tenant’s right to extend the lease for additional periods, usually at pre-set rent increases.
Renewal options increase the potential length of the lease but do not guarantee that the tenant will stay. The tenant decides whether to exercise, normally by giving notice a set number of months before the term ends. Option rent is usually set in the lease through fixed increases or a percentage of market rent. When valuing a property, a conservative buyer counts only the primary term as secure and treats options as a possible bonus.