Commercial leases are typically very one sided; pro landlord with the landlord dictating the terms and conditions of the lease. Commercial leases often allow the tenant to renew the lease for an additional agreed upon term or terms, provided the tenant follows the notice of intent to renew process and deadlines in the commercial lease.
What happens if the tenant fails to follow the notice of intent to renew process and deadlines in the commercial lease? In most cases, the tenant will be out of luck and lose the lease because the general rule is that an option to renew commercial lease clause is strictly construed and must be exercised in a timely manner. Thus, this could result in eviction, or the landlord requiring the tenant to enter into a new commercial lease. However, there might be another option under the right circumstances if, in my experience, the landlord is attempting to evict the tenant: the tenant may be entitled to an equitable grace period, which (if successful) will save the tenant from its failure to follow the notice of intent to renew process and deadlines and reinstate the commercial lease.
There is a handful of cases on this in Washington State, and Washington State appears to be in the minority on the commercial lease equitable grace period/inequitable forfeiture doctrine. For my lawyer and law student readers, I list the lead cases below.
When presented with a commercial lease equitable grace period/inequitable forfeiture doctrine case, our Courts look to the following factors: (1) whether the failure to give timely notice was purely inadvertent or was the result of intentional, culpable, or grossly negligent conduct; (2) whether an inequitable forfeiture would result if equity does not intervene; (3) whether the tenant's failure to give timely notice resulted in the landlord changing its position in any way, and whether the landlord was prejudiced thereby; (4) whether the lease was for a long term, not a short term; and (5) whether there was undue delay in the tenant giving notice.
Commercial lease equitable grace period/inequitable forfeiture cases are factually dense and highly factually dependent. And, like all lawsuits, there will be a tremendous amount of uncertainty to manage. If you are a landlord considering eviction because your commercial tenant failed to exercise its option to renew the lease on time, or a tenant facing and eviction because you missed the deadlines, I would be happy to talk to you.
Washington State Commercial Lease Equitable Grace Period/Inequitable Forfeiture Cases:
Wharf Rest., Inc. v. Protective Order of Seattle, 24 Wn. App. 601, 605 P.2d 334 (1979)
Heckman Motors v. Gunn, 73 Wn.App. 84, 867 P.2d 683 (1994)
Recreational Equip., Inc. v. World Wrapps NW., Inc., 165 Wn. App. 553 (2011)
Contact Mark D. Walters
Comments are closed.