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

Continue Reading Florida Appeals Court Rules Terms in Commercial Lease Too Vague for Renewal

Looking back at 2012, there are two memorable phrases that I frequently heard from clients: “I just need a simple lease” and “you are the best real estate lawyer ever to have lived.” This article will focus on the former statement for various reasons, one of which may or may not involve honesty.

“I just need a simple lease.” Interestingly, the remainder of the exchange tends to go something like this:

Please also make sure we have exclusivity, and oh yeah, we’re going to install some improvements which the landlord will pay for, and we may move into the adjacent space if it becomes available, and, one more thing, the rents should apply to the purchase price if we decide to buy the space.”

Simple enough?

The reality is that every lease transaction contains unique facts and circumstances, and each lease should be documented accordingly. For example, a lease for a single tenant building should be structured differently than for a multi-tenant building. A small business may be less equipped to handle certain lease administrative functions as opposed to a national chain. One size does not fit all in the leasing world, and an ounce of effort up front when drafting the lease can prevent significant uncertainty and dispute down the road.

It has been said that parties should approach a lease relationship similar to a marriage (which may hold some truth considering many landlord-tenant relationships can outlast modern marriages). Taking this analogy to its next logical step, the lease document is the prenuptial agreement – which allows the parties to memorialize their agreement at a point in time when they are both optimistic about the new relationship and willing to negotiate reasonably. Otherwise, it can be difficult to negotiate once the relationship experiences hardships or setbacks.

Unfortunately, I have seen too many instances where clients are governed by sloppy lease documents that do not give the parties the benefits of their initial bargain. Some of these instances involve what I suspect to be dreadful “internet forms.” Fortunately, simplicity can be achieved in most lease transactions, by striking the delicate balance of simplicity and effectiveness. Our role as real estate attorneys is to help achieve that delicate balance, to help our clients prosper throughout the lease term. The next time you are entering into a lease, it might be worthwhile to take a step back and give serious consideration to the possibility that your relationship with your landlord or tenant may change in the future, but the lease will remain the same. Of course, we hope that any change in the relationship is for the better.  

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. 

Continue Reading Understanding Commercial Lease Renewal Options