Legal Question in Real Estate Law in California

Re: Tenant seeks to renew lease despite expired option

Unfortunately, based on your facts, there isn't much that the tenant can do, other than negotiate a new lease with the landlord. Presumably, the parties negotiated in good faith and "at arms length" for this commercial lease. Ignorance of the lease provisions would not be a defense in this type of lawsuit unless there was a genuine mistake by both parties or fraud on the part of the landlord. That does not appear to be the case from your facts.

An option period is construed narrowly by the courts, such that a two week lapse will more likely than not terminate the option. We would be happy to discuss this further with you, including attempting to negotiate a new lease with the landlord. Please feel free to give us a call.

Re: Tenant seeks to renew lease despite expired option

Presumably, you are speaking about an option to renew the lease, with no purchase provisions. In such a case, generally, to invoke an option to renew, the tenant must apprise the landlord in unequivocal terms of the tenant's unqualified intent to exercise the option, within the agreed-uopn time and in the manner and on the terms stated in the lease. The courts routinely hold the tenant (and the landlord, for the matter), to strict and exact compliance with the terms of the option as set forth in the lease. Many reported cases uphold this position. Even a one day delay is not generally excusable.

There are very few exceptions to this rule. There is no such thing as "substantial compliance" (at least in California, where I presume this lease is being performed). This issue has also been resolved by the courts. The only two arguments that are generally effective (if at all), are (1) estoppel, and (2) waiver defenses. These are highly technical and legal arguments, but in general, conduct by the landlord upon which the tenant reasonably relies in failing to follow specified formalities for invoking the option may excuse strict and literal compliance with the option exercise provisions in the lease. (For example, where the landlord accepts rent after the purported option exercise, with knowledge that the tenant intends to renew).

Based upon the facts you have presented, it appears that your option has expired and cannot be exercised. But I would need to review considerably more facts to make a final, full and thoughtful analysis of this issue.

In addition, I wolud need to see the specific language in your lease to determine if there is hope for you in this situation.

You should contact a real estate litigator familiar with landlord/tenant issues. We are real property litigators with extensive experience in lease performance disputes. Please feel free to call or email if/when you are ready to proceed. Good luck.

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Re: Tenant seeks to renew lease despite expired option

Estoppel might work, if all the facts required to show an estoppel exist and can be proven, to produce one of three results: (1) a court might order the landlord to honor the option at this late date. I think this is very doubtful. (2) A court might order the landlord to reimburse your investment in improvements and possibly award you additional damages for the harm your business suffers in having to relocate. This is somewhat doubtful. (3) The filing of a lawsuit asserting estoppel might be a bargaining ploy to induce the landlord to negotiate a renewal on better terms.

On the other hand, none of these outcomes is a certainty, and even a semi-accurate evaluation of them would require more facts, such as what plans the landlord has for your space, now that it isn't to be re-rented to you, and whether the option to renew gave you a bargain or the renewal was to be at current market rates.

Proving an estoppel, i.e. that the other party shuld be 'estopped' from doing or not doing something, would, in this case, require proof that you expended money in reliance upon being able to renew; that the landlord knew or should have known that you were spending the money; and that the landlord knew or should have known that your expenditure was in a mistaken reliance upon being able to renew.

The landlord's defense may be that your mistake in relying on being able to exercise the option up until the termination date was not reasonable, and that in order for there to be an estoppel, the plaintiff's reliance upon the defendant's misleading conduct must be reasonable. I cannot predict how a court might rule on this.

There is also a timing problem. Getting the matter before a judge before your lease expires and you are subject to eviction would probably require obtaining a preliminary injunction, or the like; that's an additional and costly step with an uncertain result.

Your question doesn't state whether the landlord is terminating you absolutely, or whether he has offered you a new lease on his current terms. I think in most cases you'd be better off in the long run by renegotiating rather than trying to pound the option down the landlord's throat in court.