Can Tenants Provide Renewal Notice via Regular U.S. Mail?

“The notice is in the mail.”

Given how slow and unreliable regular mail can be, you probably don’t want your tenants to utter this expression, especially when the notice “in the mail” is something as significant as the exercise of a lease renewal option. That’s why you need to be aware of a venerable old law called the “mailbox rule,” which holds that, absent express lease language to the contrary, regular mail is deemed to be a “reasonable and usual” means of communicating notices required by a contract. Here’s a scenario illustrating how the mailbox rule applies to tenant renewal options.

THE LEASE

A shopping center lease gives the tenant the option to extend the lease six times, for a period of five years each. The actual language:

Clause A: If Tenant elects to exercise any of said options, it shall do so by giving Landlord notice of each such election at least nine (9) months before the beginning of each additional period for which the Lease Term hereof is to be extended by the exercise of each such option. If Tenant exercises its option by giving such notice, the Lease Term shall be automatically extended for the period of time corresponding to such option with the parties' execution of any further documentation.

There’s also a separate clause that explains how all notices required under the lease must be provided.

Clause B: Any notice, demand, election, request, consent, approval, objection, designation, or other communication that either party is required or desires to give, make, or communicate to the other party, a signatory hereto, or a Mortgagee shall be in writing and shall be given, made, or communicated either by personal delivery or by United States registered or certified mail, return receipt requested with postage fully prepaid . . . Any notice, demand, election, request, consent, approval, objection, designation, including any duplicate original, or other communication so sent shall be deemed to have been given, made, or communicated, as the case may be, on the date personal delivery was effected if personally served, or on the date of delivery (or attempted delivery) as shown on the return receipt if delivered by mail [emphasis added].

WHAT HAPPENED

In August 2014, the tenant sends the landlord, via regular U.S. Mail, notice of its election to renew the lease, which is due to expire on July 31, 2019. In December 2018, it sends the landlord a letter asking for confirmation of the renewal. A month later, the landlord tells the tenant that it didn’t properly exercise the renewal option and that the lease will expire on July 31, 2019.

The tenant insists that it did provide proper notice under the mailbox rule. And even if regular mail didn’t satisfy the lease, the tenant claims that the landlord waived its right to demand strict compliance with Clause B notice requirements by accepting a rent check dated Sept. 1, 2019, after the end of the initial lease term.

QUESTION

Should the tenant be allowed to renew the lease for another five years?

A.            Yes, because mailing the notice meets the mailbox rule

B.            No, because the lease requires personal or certified mail notice

C.            Yes, because the landlord waived its right to demand personal or certified mail notice

D.            No, because the mailbox rule doesn’t apply to commercial leases 

ANSWER

B. The landlord can reject the renewal because the tenant didn’t furnish the notice required by the lease.

EXPLANATION

The mailbox rule is a venerable principle created by courts to determine whether one party to a contract provided proper notice to the other. This scenario, which is based on a California federal court case, illustrates the application and limitations of the mailbox rule in the context of renewal and other lease options requiring notification to exercise [California Clovis, LLC v. Sierra VISTA Realty LLC, 2022 U.S. Dist. LEXIS 181526, 2022 WL 5060988].

Under basic contract law, a renewal option is deemed to be an offer that becomes a binding contract when the offeree accepts it. The mailbox rule treats the sending of the notice as an acceptance. The acceptance is effective “upon dispatch”—that is, the date and time that the recipient physically places the written acceptance into the mailbox with a postmark showing that date and time.

But there’s a big IF. The mailbox rule applies only when the contract doesn’t expressly specify an alternative method of furnishing notice. “It is well settled that when the provisions of an option contract prescribe the particular manner in which the option is to be exercised, they must be strictly followed,” noted the California Clovis court in awarding the landlord summary judgment. The lease in this case included “clear and explicit” language explaining how the tenant had to exercise its renewal option:

• Clause A required the tenant to provide notice within nine months of lease expiration; and
• Clause B specified that the notice had to be provided personally or by certified or registered mail, return receipt requested.

Although the tenant purported to send the renewal notice well in advance of the nine-month deadline imposed by Clause A, sending it via regular mail ran afoul of Clause B. As a result, the renewal notice was improper, and B. is the correct answer.

WHY WRONG ANSWERS ARE WRONG

A is wrong because regular mail is a default provision that applies only when the lease doesn’t say how notice is to be delivered. The “consistent, ordinary meaning” of Clauses A and B “obligated the tenant to notify the landlord of its election to renew the sublease in writing and to deliver it personally or via registered/certified mail with a prepaid return receipt,” the California Clovis court reasoned. Result: The mailbox rule didn’t apply.

C is wrong because waiver requires “clear and convincing evidence.” The tenant in this case had only one piece of evidence suggesting that the landlord waived its Clause B right to receive personal or certified mail notice of renewal—namely, the landlord’s acceptance of a single post-expiration date rent check. This wasn’t clear and convincing evidence of the landlord’s acceptance of renewal notice by regular mail, the court concluded, especially since the landlord’s January 2019 letter expressly stated that proper notification had not been provided and that the lease would expire on July 31. 

D is wrong because the mailbox rule does apply to commercial leases, as well as other kinds of what are called “executory contracts.”

TAKEAWAY

Be aware of the mailbox rule and its implications—namely, that it may allow tenants to provide notices that the lease requires via Plain Jane regular U.S. Mail. Relying on such notification methods can be a dicey proposition for landlords, particularly for notices involving the exercise of renewal and other important lease rights. The good news is that you can take the mailbox rule out of play by including lease language requiring tenants to meet more stringent notification requirements, like the landlord did in the California Clovis case. You may also want to consider taking things a step further by expressly stating that the mailbox rule doesn’t apply and that notice via regular mail will be deemed inadequate. Speak to your attorney about a notification clause strategy that makes sense for you.

Last but not least, recognize that the mailbox rule may apply not only to notifications but other key lease transmissions, such as payment of rent. Thus, for example, the mailbox rule might determine whether a tenant that mails its rent check one day before the due date paid rent on time, even if the landlord doesn’t actually receive that check until a week or more later.