When is a lease renewal considered non-nominal?

A lease renewal is considered non-nominal when the rent is based on fair market rent at the time of renewal. This means that the renewal terms reflect the current market conditions and the prevailing rates for similar leases, indicating that the lessee is paying a fair price rather than merely continuing with a nominal or token amount that may not represent the actual value of the lease.

In contrast, nomimal renewals often involve rental rates that are significantly lower than market rates or that do not change at all, which does not accurately reflect the economic realities of leasing in the current market. By tying the renewal rent to fair market values, the lease renewal upholds a standard of fairness and equity, ensuring that both parties are engaging in a transaction that is beneficial and justifiable based on current market dynamics.