Jones Lang LaSalle

Lease Renewals: Who Has Upper Hand?
February 03, 2006
By Michael Fickes, Mid-Atlantic Correspondent

With the revived economy, the worm may be turning for beleaguered landlords who for several years now have feared taking a tough line with tenants, especially tenants approaching renewal.

Take the recent case of Chesapeake Bank of Maryland v. Monro Muffler-Brake. Chesapeake's opportunity arose when a Monro executive recorded the wrong deadline for exercising a lease renewal option. Of course, Chesapeake had no idea that Monro had made a mistake. But when Monro tried to renew--27 days late--Chesapeake terminated the lease. Chesapeake didn't say why, but the botched lease renewal gave Chesapeake an excuse to do whatever it wanted.

Then Monro sued and won. The trial judge held that Monro's untimely notice of renewal along with other correspondence "clearly demonstrated its intent to exercise the extension option." The judge granted Monro's petition to renew the lease.

Not to be denied, Chesapeake appealed. The Court of Special Appeals of Maryland reversed the trial court, saying essentially that late is late.

"The Appeals Court said that Munro plainly agreed (by signing the lease) to give notice of renewal 90 days before the expiration of the lease," Paul Kiernan (pictured), a partner with the Washington, D.C.-based law firm of Holland & Knight told CPN. "When Monro was late and Chesapeake terminated the lease, there was nothing the court was willing to do about it."