Termination Option Applied During Extension Term

March 1, 2007


A lease's rider gave a tenant two termination options. The second option could be exercised “at the completion of the twenty-fourth (24th) lease month.” The initial lease term ended on March 31, 1999, but the parties amended the lease and extended the term until March 31, 2009. Each amendment said that the lease's terms and conditions would remain in full force and effect.


A lease's rider gave a tenant two termination options. The second option could be exercised “at the completion of the twenty-fourth (24th) lease month.” The initial lease term ended on March 31, 1999, but the parties amended the lease and extended the term until March 31, 2009. Each amendment said that the lease's terms and conditions would remain in full force and effect.

On Oct. 14, 2005, the tenant exercised its option to terminate the lease on March 31, 2006—the 24th month of the extension term. The owner tried to block the termination, arguing that the termination option didn't apply during the extension term.

A federal court in Michigan ruled that the termination option also applied during the extension term. The court noted that the lease was “clear and unambiguous on its face.” The court rejected the owner's attempt to use outside evidence to prove that the parties did not intend the termination option to apply during the extension term.

The lease specifically said that the terms and conditions in the lease and its exhibits and riders set forth the entire agreement of the parties, noted the court. Plus, there was no proof of fraud, illegality, or mistake. Thus, the tenant did not violate the lease by exercising its early termination option for March 31, 2006, said the court.

  • General Pattern Co. v. REIT Management & Research, LLC: No. 06-CV-12627, 2007 U.S. Dist. LEXIS 7173 (U.S. Dist. Ct. E.D. Mich. 2/1/07).

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