In November 1997 James Caswell signed
a long-term lease with AHTNA. James was the Tenant; AHTNA the Landlord. The Lease
contained options for the Tenant to extend the lease term. There were two conditions
to each option exercise. First, James could not extend if he was in
default. Second, James had to furnish AHTNA a written option exercise
notice at least 90 days prior to the expiration of the then-current lease term.
Rent payments were timely tendered
to AHTNA and each was accepted and processed. James failed to furnish notice of
option exercise at the end of the primary term, but instead he remained at the
Premises and continued to pay rent after the expiration of the term.
In May 2018 AHTNA filed an eviction
complaint against James, stating that James was unlawfully possessing the
property. AHTNA alleged that since James had failed to furnish written notice
of an option exercise, James had no present right to occupy any portion of the
In response, James argued that his
continued possession of the Property was lawful because he had exercised a
renewal option by furnishing a check in December 2017 with the memo “2018
annual lease” included in it. And that since AHTNA accepted the payment
without complaint, the notice provision of the Lease requiring written option
exercise notice is waived.
A two-day eviction hearing was held
in August 2019. The court granted an eviction judgment to AHTNA, finding that
the original Lease term had expired, James had not furnished the required
renewal notice, and AHTNA had not waived the notice requirement.
Without much discussion other than
distinguishing between situations where a Landlord cashed 36 monthly rent
checks without objection after the expiration of a lease term versus the one or
two checks tendered by James to AHTNA, the Supreme Court determined that the option
exercise notice requirement was not waived. The mere tender of a few rental
payments after the date of Lease expiration would not have the effect of
renewing or extending the Lease term.
AHTNA wins again; James loses again.
See Caswell v. AHTNA; Alaska Supreme Court, Case No. S-17866, May 20,
Lessons / Questions / Observations:
1. Observations. I didn’t tell you that this case comes to us from Alaska. I also didn’t tell you that this case involves a limestone-mining operation. Does that make a difference to your non-Alaskan commercial or residential application? The Alaskan Supreme Court did not reach any conclusions based on the use of the property.
2. Lesson For Tenants and Subtenants: Read the Lease carefully and if written notice is required, furnish it exactly as stated to preserve your valuable extension / renewal rights.
3. Lesson For Landlords and Property Managers: If written notice is required and not furnished, then you may be able to avoid lease renewals even if you accept a few rent payments after the term has expired.
4. Question For Landlords and Property Managers. Have you considered revising your Leases to provide that the mere delivery of rent checks after term expiration, even if deposited by Landlord, will not serve to extend the lease term?
Stuart A. Lautin, Esq.*
* Board Certified, Commercial (1989) and Residential (1988) Real Estate Law, Texas Board of Legal Specialization
Licensed in the States of Texas and New York
Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.
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