What is a "lease extension premium"?

A "lease extension premium" refers specifically to a fee paid to extend the lease term beyond its original expiration date. When a lessee wishes to continue using the leased property after the initial lease has concluded, they often need to negotiate terms for extending the lease. This negotiation typically involves a premium or fee as an incentive for the lessor to agree to the extension.

In commercial or residential leases, this premium can be structured in various ways, including a one-time payment or potentially an adjustment to the rent during the new lease term. The concept is critical in leasehold management as it directly relates to the rights and obligations of both the lessor and lessee regarding the duration of their contractual relationship.

The other options do not accurately represent the concept of a lease extension premium. Payments for additional parking spaces, upfront costs for lease transfers, and annual fees for lease maintenance address different aspects of leasehold arrangements, separate from the specific nature of extending the lease term itself.