Make Sure Your Renewal Option is SPECIFIC

Make Sure Your Renewal Option is SPECIFIC

Spread the love

Make sure the renewal option provision in your commercial lease is specific.  Otherwise, an illogical outcome may reached, as exemplified in Jahagiri v. 1830 North Bayshore, LLC, 43 Fla.L.Weekly D1806a (Fla. 3d DCA 2018).  

In this case, the renewal provision in the commercial lease provided:

RENEWAL OPTIONS: Upon six months notice and provided [lessee] is not in default of any provision of this Lease, LESSOR agrees that [lessee] may renew this Lease for two five-year renewal options,each renewal at the then prevailing market rate for comparable commercial office properties.

During the initial lease term, the commercial tenant timely paid its rent.  However, when the tenant elected to renew it lease, the landlord refused, apparently arguing that the renewal provision was not enforceable under the law because it failed to state the amount of rent upon renewal.

The appellate court agreed holding that the renewal provision was too indefinite to be enforceable—”there are too many open questions about “prevailing market rate[s]” and “comparable” properties for us to conclude that there was a meeting of the minds on rent” in the renewal paragraph.  The lack of specificity meant that the commercial tenant had no enforceable renewal option, which is a harsh outcome considering the tenant built its business at that location and invested money for purposes of that location only to learn that the renewal option it thought it bargained for was invalid!

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.