Bankrupt Tenant Can Renew Lease Despite Defective Renewal Notice

What Happened: A restaurant tenant with a habit of paying rent late took advantage of the COVID-19 shutdown to make some improvements to the space at its own expense, assuming that it would be able to renew once the lease came to an end in August 2021. But the tenant was still in big-time arrears and the landlord nixed the renewal, claiming that the tenant didn’t give proper renewal notice. With relocation out of the question, the restaurant filed for bankruptcy and remained in the space. The landlord then sued to lift the automatic stay so it could evict the tenant.  

Ruling: The Florida bankruptcy court ruled that the landlord didn’t have “cause” to lift the stay because the tenant had effectively renewed the lease.

Reasoning: The lease didn’t give the landlord the right to either accept or reject renewal; it merely required that the tenant not be in default and give written notice of its intent to renew no later than six months before the initial term ended. The tenant wasn’t in default because it cured the nonpayment problems to the landlord’s apparent satisfaction. And while it sent the renewal notice via a form of delivery not included as being acceptable for giving notice under the lease—first-class mail—the landlord was on notice that the tenant intended to renew because it invested so much money to remodel the space in the final months of the lease.

• In re Jaffan Int'l, LLC, 2022 Bankr. LEXIS 1167