Specific Performance Compelled Only for Terms Spelled Out in Lease

Facts: A property owner leased space to a tenant for its hardware store. The lease contained an “option to purchase” clause that provided a payment timeline for the tenant to follow in the event that it wanted to purchase the space in the future.

When the tenant eventually tried to buy the space, though, the owner refused to sell. It claimed that the tenant had not made the request according to the provisions in the lease and, therefore, had not exercised its option to buy. The tenant argued that it had properly notified the owner in writing of its intention to exercise its option.

The tenant sued the owner, and the trial court ordered “specific performance,” allowing the tenant to exercise his option. However, the trial court didn't credit the tenant for several periodic payments it had already made to the owner in accordance with the payment timeline in the option to purchase clause.

Although the tenant agreed with the trial court that specific performance of the lease was appropriate, it appealed the decision because it wanted to recoup the payments.

Decision: The appeals court upheld the trial court's ruling.

Reasoning: A court will order specific performance of a lease only when it determines that the contract is “reasonably complete and reasonably definite on material points.” Here, the lease provisions were reasonably complete and definite as to the method the tenant needed to use to notify the owner of its intention to exercise its option.

Because the tenant used that method, the remedy of specific performance was appropriate. The tenant was not entitled to credit for its periodic payments to the owner, however, because the lease did not contain any provisions regarding credit for payments, merely a timeline for when payments were to be made.

• Marshall v. Lindsly, April 2009