Commercial Lease Allowed Only One Extension of Term Absent Clear and Explicit Language Granting Perpetual Extensions
The commercial property lease in this case gave tenant “the option to extend the term of the lease for additional five year periods upon the same terms and conditions contained in the lease”. After the first term was up, the tenant elected to extend the lease for an additional term and thereafter attempted to do so for a second additional term. The landlord brought an action for declaratory relief to establish that the tenant was entitled to only one extension of the leasing term. The tenant, on the other hand, argued that the language clearly provided for extensions in perpetuity. The Los Angeles County Superior Court agreed with tenant. The landlord appealed and the Court of Appeal, Second Appellate District, reversed the trial court.
The court noted that lease provisions which appear to create a right to perpetual renewals are disfavored and will be upheld only where the parties’ intent to create a perpetual right is explicit and clear. Examples of such explicit and clear wording could include language like “in perpetuity, forever, or for all time, except as limited by statute.” Here, there was no such clear language. While the court acknowledged that the leasing language discussed term periods in the plural, it nonetheless found the language ambiguous. Accordingly, the tenant was entitled to only one extension of the original lease term.
Ginsberg v. Gamson (2012) 205 Cal.App.4th 873