Lease Expiration Date Unclear

A tenant's extension option required the tenant to notify the owner at least six months before the lease expired that it was exercising the option. The lease said it began on Sept. 25, 1970, and terminated “on the 31st day of January after the completion of the thirty-first (31st) full lease year.” The lease defined a “lease year” as any 12-month period starting on “a February 1st.” And the lease said that the “first lease year” began on Sept. 25, 1970, and ended on Jan. 31, 1971. On May 24, 2001, the tenant notified the owner that it was exercising the extension option. The owner told the tenant that it was too late—the lease had expired on Jan. 31, 2001. The owner claimed that the “first lease year” (Sept. 25, 1970, through Jan. 31, 1971) counted as one of the 31 lease years. The tenant argued that the lease wouldn't expire until Jan. 31, 2002.

A federal appeals court ruled that it was unclear if the first lease year had to span 12 months to count in the 31 years. The owner showed the court documents dating back to 1976 indicating that at least one or both of the parties understood that the lease would expire on Jan. 31, 2001. The appeals court returned the case to a lower court for a decision and advised it to review those documents in deciding when the lease expired [Tel-Towne Properties Group v. Toys “R” Us-Delaware, Inc.].