Florida’s Third District Court of Appeal recently handed down a decision that may make the lives of landlords and tenants a little more difficult.

In Jahangiri v. 1830 North Bayshore, LLC, the owners of a Miami deli tried to exercise their first renewal option under a commercial lease. The tenants were not able to exercise their first renewal option because the Court ruled that the renewal provision lacked a definite price term or definite procedure to determine the price term in the future.

Background

La Bottega on the Bay, LLC, entered into a written lease for commercial property in Miami with landlord 1830 North Bayshore, LLC. The lease contained the following provision:

RENEWAL OPTIONS: Upon six months [sic] 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.”

Throughout the initial five-year term, the tenants timely paid rent and were otherwise in compliance with the terms of the lease. Upon trying to renew the lease under the Renewal Option, the landlord refused to renew. The tenants then sued to enforce the Renewal Option.

Ruling


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Commercial Lease.jpgCommercial leases often contain the option of additional or “renewal” terms to extend the lease term. Reviewing and understanding this provision in your lease can help maximize your lease rights, whether you are the landlord or the tenant. This post focuses on the importance of a well-drafted renewal option provision, and the need to monitor critical deadlines.

Mechanics of Renewal Options

Understanding the mechanics of renewal options is important. Some parties prefer automatic renewals, while others favor the delivery of notice to exercise renewals. There can be one or more renewal options. Several factors can influence how to best structure the renewal option provision, such as current and anticipated market conditions, landlord concessions, tenant incentives, business planning, and your administrative ability to monitor deadlines, to name a few. 


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