Tenant Must Comply with Renewal Language

Facts: A tenant signed a lease with the city that contained several 10-year renewal options. The lease stated that prior to exercising the option, the tenant must give a six-month notice of its intention to renew.

The tenant eventually defaulted on the lease, and a receiver was appointed to manage the property. The receiver handled the day-to-day operations and finances for the property, but mistakenly overlooked the six-month notice deadline, as required by the lease. After missing the notice, the receiver contacted the city to inquire about the rent for the next 10-year term. The city provided the receiver with the information, but did not mention the notice oversight. About two weeks later, the city sent a notice, informing the receiver that it had missed the deadline and had become a holdover tenant.

The receiver filed a notice with the court to clarify its lease status. The trial court, based on circumstances that it deemed relevant, ruled in favor of the tenant and ruled that the lease had been renewed. Specifically, the court said that “the City should have understood from the receivership proceedings that everyone intended for the lease to continue for at least 10 more years.” The city appealed.

Decision: An Ohio appeals court reversed the trial court's decision and ruled in favor of the city.

Reasoning: The court ruled that because the lease contained unambiguous terms that clearly defined the process required to renew the lease, the receiver had a responsibility to follow the notice requirements, regardless of the city's knowledge or the receivership proceedings.

• Fifth Third Bank Western Ohio v. Carroll Building Co., January 2009