A Study On The Commercial Renewal Option

In China, the adjustment of the leasehold relationship laws is based on theContract Law of the People’s Republic of China. The thirteenth Chapter has madeclear stipulation of the lease contract issues, whereas Chinese legislation patterncombines the civil and the commercial, in Chinese law, there is no distinctionbetween civil and commercial lease. In the meanwhile, the legislative thoughtsexpress more bias in the civil protection, enriching and consummating the civil leaselegislation, while leaving the commercial lease system almost blank.Commercial Renewal Option, refers to the rights in the commercial rentalpossessed by the lessee, upon the expiration of the lease term, and in accordancewith the law, the lessee shall have the right to request the renewal of the leasecontract. Renewal Priority, refers to the rights in the commercial rental possessed bythe lessee, before the expiration of the lease, the lessor shall inform the lessee, andthe lessee shall enjoy the priority to rent the rights under the same conditions.Compared with the Commercial Renewal Option, Renewal Priority presents thedefects that the lessee possesses less rights, difficult to define under the samecircumstance, the lessee abuses the right and harms the lessor, lack of relief after theinfringement, so in the establishment of the institution, this paper adopts the conceptof the Commercial Renewal Option.Commercial lease possesses its particularity. The establishment of thecommercial lease contract is generally based on sheer economic interests, whereinthe lessee is engaged in production and business activities, which determines thecommercial lease contract a long-term and flexible contract as well. Otherwise thelessee shall not be assured of investment activities, or adjust business strategy andmanagement content to the market demand, which shall ultimately affect the marketeconomy sustainable development. Therefore the “one fits all” approach in civil andcommercial matters reflects the deficiency of the Chinese legislation system, which also leads to issues that merchants often confront with: whether to admit thecommercial renewal priority, how to define whether or not the lessor has the leaseintention, the execution period of the commercial renewal priority, under whatcircumstances may the lessor confronts the lessee’s renewal priority. In view of theurgent issues and the “preemptive” and “sale cannot break lease” principles, it isnecessary and feasible to establish the Commercial Renewal Option to protect thelessee interests after the expiration of the lease term, meanwhile limiting the rights ofthe lessor and creating a stable rental environment.The practice of the Commercial Renewal Option requires a long term validlease relation as the premise, the lessee must possess the qualification of commercialsubject, and will lease the housing for commercial use. Commercial Renewal Optionis aimed at protecting the lessee’s customer groups and business assets during theleasing period, if the lessee leases the housing only to obtain the price difference,then there is no need to extend the renewal protection of the lease relation. AlthoughCommercial Renewal Option is the legal right,but the lessor and the lessee still havethe freedom of expression.Both sides in the lease contract can exclude theapplication of Commercial Renewal Option. The exercise of the rights of the lesseeshall be limited by the legal renewal procedure, in order to avoid the interest loss dueto the neglect of legislation.Commercial Renewal Option is not a right of continuity, for it may lose itsefficiency due to the practice of rights and the invalidity of the lease contract, thedefault of the lessee, the lessee’s neglect of the right, the lessor’s decline of the leaserenewal, and the leasehold’s loss, etc. At the same time, as the causes of the loss ofrights is different, which can lead to the establishment of a new lease contract, therelief of the original lease contract or compensation payment.The enforce of regulation of commercial lease system has great significant ofmaintaining the interests and enthusiasm of the merchants, protecting the interestsbetween the lessees and the lessors, which can also fulfill the special requirements ofrelevant lease of premises, and promote the development of commercial leasingmarket. The establishment of the Commercial Renewal Option institution, not only fills the blank of Chinese commercial leasing law, but also provides the theoreticalsupport for the current commercial lease cases.