Uncertainty as renewal notice deadline approaches

Avoid uncertainty as renewal notice deadline approaches
When a landlord gives a tenant a renewal option, typically the landlord requires the tenant to notify the landlord of its intent to exercise this option by a certain deadline.

"The landlord may think that if the tenant misses this deadline, it loses the right to exercise the renewal option. But that's not always true. Some state courts may rule that if a tenant misses the renewal notice deadline because of, for example, an oversight, the landlord must still honor its late renewal notice.


So what does a landlord do if a tenant's renewal notice deadline is rapidly approaching and the tenant has not given its renewal notice?
Landlords may be wary about starting negotiations with a replacement tenant until they are sure that the current tenant is not planning to renew its lease.


To avoid this problem, some landlords send certain tenants a letter reminding them of the upcoming renewal option deadline, and stressing that a late notice will not be honored. The landlord will not want to send a renewal option a letter reminding it of its upcoming renewal notice deadline to every tenant with a renewal option Deciding when to send such a letter will depend in large part on what your state's position is on late renewal notices and the enforcement of time is of the essence clauses.


Most states' courts have followed the view that an owner should be compelled to honor a late renewal notice only under very limited circumstances, such as when the failure to serve notice on time was caused by fraud, duress, undue influence, misrepresentation, or mistake.


A handful of states may require owners to honor a tenant's late renewal notice if the owner was not prejudiced. Courts in these states typically weight the following 4 factors when deciding whether an owner must honor a tenant's late renewal notice:


(1) Reason for failure to give timely notice – whether the
reason for the late notice was due to an honest and justifiable mistake;


(2) The length of tenant's delay – whether the tenant
gave its notice only a few days late or months late;


(3) Prejudice suffered by owner – whether the late notice
prejudiced the landlord because it wasted money marketing the space or negotiating a new lease with a replacement tenant; and


(4) Hardship suffered by tenant – whether the tenant will
be hurt if the landlord does not honor the late renewal notice, e.g.
tenant won't recoup substantial cost of its improvements."
for more information see www.houstonrealtyadvisors.net

from Professional Building Office Management, June 2004