Notice of Lease Renewal Ineffective Because Not Timely Sent

On February 12, 2019, Justice Scarpulla of the New York County Commercial Division issued a decision in Foscarini Inc. v. Greenestreet Leasehold Partnership, 2019 NY Slip Op. 30307(U), holding that a notice to renew a lease was ineffective because it was sent too late, explaining:

The basis for virtually all relief sought by Greenestreet on this motion rests on its contention that Foscarini failed properly to exercise its rights to renew the Lease for an Extended Term. An election to renew must be timely, definite, unequivocal and strictly in compliance with the lease term. Thus, to properly renew the Lease for the Extended Term, Foscarini was required to provide Greenestreet with a clear, unequivocal written Renewal Notice within the Renewal Period ("not sooner than twelve (12) months and not later than six (6) months prior to" the Initial Term's termination date).

Although the first page of the Lease provides that the Initial Term ends on December 31, 2016, paragraph 40 of the Lease Rider contains the following conflicting provision: The term of the Lease shall be five (5) years, commencing on January 16, 2011, and expiring on the last day of the sixtieth full calendar month of the term. If the Commencement Date is other than the first day of a calendar month, then Tenant shall pay a prorated amount of Rent for the partial first month and Month 1 in the chart below shall be deemed to be the first day of the first full calendar month following the Commencement Date.

Pursuant to paragraph 40, the Initial Term ends on January 31, 2016, the last day of the sixtieth full month following the partial month of January 2011. Despite this contradiction, paragraph 70 in the Lease Rider provides that where "any of the provisions of this Rider conflict or are otherwise inconsistent with any of the preceding printed provisions of the main body of the Lease the provisions of this Rider shall prevail." (emphasis added). Therefore, per paragraph 40, the Initial Term ended on January 31, 2016 ("Termination Date").

Accordingly, the Renewal Period during which Foscarini could provide Renewal Notice ran from January 31, 2015 (twelve months prior to the Termination Date) through July 31, 2015 (six months prior to the Termination Date). As a matter of law, Greenestreet's January Letter was ineffective and did not constitute Renewal Notice because it was untimely sent before the Renewal Period commenced on January 31, 2015. Likewise, the February, May, June, and July Emails - which were sent by Foscarini to Greenestreet during the Renewal Period - failed strictly to comply with the Lease's written notice requirements set forth in paragraph 64 of the Lease.

The January Letter and the February, May, June, and July Emails were neither definite nor unequivocal because the language was conditioned upon the parties agreeing to a Renewal Rent acceptable to Foscarini. Because Foscarini's letters were conditional, equivocal and/or untimely, Greenestreet has established that Foscarini failed to renew the Lease pursuant to the Renewal Option. Greene street is therefore entitled to judgment dismissing Foscarini's breach of contract claim based on Greene street's failure to recognize that Foscarini validly renewed the Lease.

(Internal quotations and citations omitted) (emphasis added).

We frequently litigate disputes regarding commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.