Late Rent Payment Didn't Invalidate Renewal Option Exercise

A hair salon lease gave a tenant a renewal option, but said the tenant couldn't be in default of the lease at the time it exercised the option. In July, the tenant notified the owner that it was exercising its option. The owner later rejected the tenant's exercise of the renewal option, claiming that the tenant was in default because it had paid its July rent late. The owner asked the court to evict the tenant from the space because the lease had expired.

A New York court ruled that the tenant wasn't in default of the lease at the time it exercised its option. So the lease had been renewed. Although the tenant's July rent payment was late, evicting the tenant from the space wasn't reasonable, the court said. The tenant proved that it would suffer great harm if the lease weren't renewed, as it had made substantial improvements to the space. And the court couldn't find any evidence of harm to the owner if the renewal went into effect [Denice v. Lin-Ed Enterprise, Inc.].