Tenant's Letter Didn't Extend Lease Term

June 30, 2003

A lease gave a tenant an extension option to be exercised by a notice “personally delivered or sent by certified or registered U.S. mail” at least 120 days before the lease expired. Seven months before the lease's expiration date, the tenant sent the owner notice by first class mail, reading: “This letter is to inform you of our intent to exercise our option to extend the lease term.” The parties later met to discuss the terms of the extension lease.

A lease gave a tenant an extension option to be exercised by a notice “personally delivered or sent by certified or registered U.S. mail” at least 120 days before the lease expired. Seven months before the lease's expiration date, the tenant sent the owner notice by first class mail, reading: “This letter is to inform you of our intent to exercise our option to extend the lease term.” The parties later met to discuss the terms of the extension lease. A little later, the tenant notified the owner that its first notice was only an invitation to negotiate extension terms—that is, it didn't exercise the extension option—and that the terms of the extension lease were unacceptable. When the original lease term expired, the tenant moved out of its space. The owner sued the tenant for violating the lease.

A Michigan appeals court ruled that the tenant's first notice didn't exercise the extension option, so it hadn't violated the lease. The first notice wasn't delivered personally or by certified or registered mail, as required by the lease, the court noted. The owner couldn't “unilaterally waive” compliance with those delivery terms to force the tenant to exercise an option that it didn't want to exercise, said the court [Hunter Square Office Building, LLC v. Paragon Underwriters, Inc.].

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