Landlords and Tenants Beware: A Party’s Conduct May Result in Lease Renewal Notwithstanding the Express Terms of the Lease

Many commercial leases grant tenants options to renew subject to certain notice requirements, such as providing written notice to the landlord within a certain period of time prior to the scheduled termination of the lease. Notwithstanding such requirements, the Eastern District of the Missouri Court of Appeals recently held in Eighty Hundred Clayton Corp. vs. Lake Forest Development Corp., No. ED110390 (Mo. App. E.D. 2022), that a lease may be renewed as a matter of law without notice through the actions of the parties after the lease term expires.

In Eighty Hundred Clayton Corp., the lease at issue granted tenant the option to renew the lease for successive ten-year terms until 2049. Under the renewal provisions, tenant was obligated to notify landlord in writing of its election to renew at least six months before the end of the then-current term.

At issue in the instant case was tenant’s option to renew following the term ending October 31, 2019, which required tenant to notify landlord in writing of its intent to renew by April 30, 2019. There was no evidence that tenant provided landlord with written notice of its intent to renew the term within the time period required by the lease. Instead, upon the expiration date of the lease, tenant remained in possession of the property and continued to make rent payments, and landlord continued to accept such payments. On May 19, 2020, over six months following the lease’s stated expiration date, landlord notified tenant that because it had not received a renewal notice from tenant, landlord considered the lease expired as of October 31, 2019. Landlord then continued to accept rent payments until early 2021.

The Missouri Court of Appeals affirmed the trial court’s ruling and held that, as a matter of law, the tenant’s holding over after the expiration date of the lease, coupled with its continuing payments of rent demonstrated tenant’s intent to renew the lease for the entire 10-year term, and the landlord’s acceptance of rent for over a year demonstrated landlord’s intent to waive its right to require written notice of renewal under the lease.

Eighty Hundred Clayton Corp. serves as a warning to both tenants and landlords that the express language of a lease may not be sufficient if the parties act contrary to such terms. Instead, the parties’ conduct may control despite such express language.

It is important to note that at the time of this alert, the opinion has not yet been released for publication in the permanent law reports, it may be subject to a motion for rehearing or transfer and it may be modified, superseded or withdrawn.

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