No Leniency If Your Business Misses the Deadline for Renewing Its Lease

If you are a business owner with a lease for real property that contains an option to renew, double-check to see whether you must give notice to your landlord of your intention to renew, or your business may be out on the street.

A recent decision by a Maryland court should serve as a warning if you are a business owner that leases your building. You should check the terms of your lease to determine whether it requires you to notify your landlord to renew your lease and, if so, whether that notice is due on or before a specific date. If your lease has such a renewal notice requirement, make sure that you don’t miss that date for providing notice – even by a single day – or the landlord might have the right to terminate the lease no matter on the hardship to your business.

The recent Maryland court decision involved a bank’s lease of land and a building to a tire shop in Cockeysville. The initial term of the lease was for 20 years, but the lease contained a renewal clause that allowed the tire shop to renew its lease for an additional 5 years. The lease, however, required the shop to give notice of its desire to renew “at least ninety (90) days” before the 20-year term expired. Because the 20-year term expired on November 1, the 90-day requirement meant that the tire shop had to give notice to renew its lease no later than August 2.

In this case, the shop mistakenly calendared September 1 – not August 1 – as the deadline for sending notice of renewal to the bank. After the shop sent its notice on August 27, the bank terminated the release. The tire shop sued to force the bank to renew the lease. The court refused, holding that because the tire shop did not give notice at least 90 days before the November 1 expiration of the lease, the bank rightfully terminated the lease. The court, in essence, held that 90 days means 90 days, and it rejected a number of arguments by the tire shop, including:

As for termination of the lease causing undue harm to the tire shop, the court held that harm to the tenant did not matter;

As for the unfairness of punishing the tire shop for an innocent mistake, the court held that the mistake didn’t matter and said that the tire shop had an obligation to comply with the strict notice requirements of the lease;

As for any obligation of the bank to have reminded the tire shop that the 90 day period for renewing the lease was approaching, the court held that a landlord has no obligation to notify its tenant of upcoming deadlines, unless the lease requires it.

Thus, you should check your lease to determine whether it contains a renewal clause that contains a deadline for giving notice to your landlord of your exercise of any renewal option. Missing that deadline – even by a single day – could result in termination of your lease, no matter how damaging to your business.

For more information on this subject please contact Josh Glikin.