Tenant Didn't Waive Right to Terminate Leas

A lease said that the owner had to build the tenant a stand-alone structure, and that if the owner didn't start construction by a certain deadline, the tenant could terminate the lease. The owner had problems getting the city to approve the site plan, which it needed before it could start construction. The owner worked with the tenant's construction manager to address the city's concerns. But the owner never requested an extension of its deadline, as permitted by the lease. When the deadline passed, the tenant notified the owner that it was terminating the lease. The owner sued the tenant for violating the lease, arguing that the tenant had waived its right to terminate because its construction manager had continued to work with the owner, after the deadline had passed, to get the city's approval.

A California appeals court ruled that the tenant had properly exercised its right to terminate the lease. The court said that even if the tenant's construction manager's attempts to help get city approval created an “implied waiver” of the deadline, the tenant had the right to withdraw that implied waiver, as long as the owner hadn't materially relied on the waiver to its detriment. Since the owner had spent only a small amount of money on the project—and hadn't made a loan commitment to fund the construction—it couldn't argue that it had materially relied on the implied waiver, the court said [Olivewood Plz., Inc. v. Chief Auto Parts, Inc.].

ssence, nor did it specify how quickly the repairs had to be made [Grunsell v. Saaf].