Tenant Must Participate in Renewal Rent Appraisal Procedure

A lease said that the amount of an annual renewal rent would be the larger of: 1) the fair rental value of the land under the space at the time of the appraisal (appraised as if the land were vacant) or 2) the amount of annual rent at the end of the immediately preceding lease term. If the parties couldn't agree on an annual renewal rent at least 18 months before the lease ended, appraisers would determine the fair rental value. Because the owner and tenant didn't agree to the annual renewal rent before the 18-month deadline, the owner tried to enforce the lease's appraisal procedure and to get any unpaid rent owing since the renewal term started. The tenant refused to participate in the appraisal procedure and, fearing that the renewal rent would be higher than the initial rent, claimed that the owner had waived its right to get a rent increase during the renewal term.

A New York appeals court ruled that the tenant must participate in the appraisal procedure. The lease included a “no-waiver” clause, so the owner hadn't waived its right to get “bargained-for” (including increased) rent during the renewal term, said the court. The precise amount of any unpaid rent owing to the owner since the renewal term started couldn't be determined unless the parties completed the appraisal procedure, added the court [IG Second Generation Partners, LP v. Kaygreen Realty Co.].