from Florida Realtor Magazine, September 2007 | page 8
Know the Law Did the Lease’s Option to Renew Expire?
The 4th District Court of Appeal recently ruled on a case, PL Lake Worth Corp vs. 99Cent Stuff-Palm Springs LLC (949 So.2d 1199), where the landlord claimed that the tenant’s renewal option in the lease had expired. The tenant claimed that the landlord did not cooperate by giving the tenant information to allow it to decide whether or not to renew.
The landlord owned a shopping center and leased a space to 99Cent Stuff for five years. The lease did not require the tenant to pay for any common area expenses or real estate taxes. The lease also gave 99Cent Stuff an option to renew for five years at a specified base rent plus common area maintenance and real estate taxes.
Months before the option to renew had to be exercised, 99Cent Stuff asked the owner for estimated costs for the common area maintenance and the taxes. The owner refused to provide the information before the time expired for the tenant to notify the landlord that it wanted to exercise the option to renew the lease. In fact, 99Cent Stuff had requested the information from the owner on more than one occasion.
Although the owner initially indicated that the information would be provided to the tenant, it was not forthcoming.
At the trial, the owner testified that provision of the estimated cost information was not done because the lease did not require it. 99Cent Stuff did not exercise the option by the deadline because it had not received the information. Ultimately, the tenant did receive the information and attempted to exercise the option to renew. This resulted in the subsequent litigation.
After a nonjury trial, the trial court found that the owner had breached an implied duty of good faith when it refused to give the information. The District Court affirmed the ruling of the trial court based on a 1939 case known as Sharp vs. Williams (192 So. 476), which stated: “When a party stipulates that another shall do a certain thing, he thereby impliedly promises that he will himself do nothing which will hinder or obstruct that other in doing that thing; and indeed if the situation is such that the cooperation of one party is an essential prerequisite to the performance by the other, there is not only a condition implied in fact qualifying the promise of the latter, but also an implied promise by the former to give the necessary cooperation. … Prevention or hindrance by a party to a contract of any occurrence or performance requisite under the contract for the creation or continuance of a right in favor of the other party, or the discharge of a duty by him, is a breach of the contract.”
In this case, the owner argued simply that because the contract did not require the owner to furnish the information, there was no duty to do so. The District court stated, “This argument of course ignores that there can be an implied duty to cooperate, which our supreme court recognized in Sharp. …”
The court also cited the 1982 case of Bowers vs. Medina (418 So.2d 1068), in which a contract for the sale of a home provided for the buyers to obtain a mortgage in a specific amount. The owners of the home refused to make the property available for appraisal, which was necessary for the buyer to get a loan commitment.
The trial court found that the owners had breached a good faith duty of cooperation by refusal to permit the appraisal, and the 3rd District Court affirmed, stating: “An established contract principle is that a party’s good faith cooperation is an implied condition precedent to performance of the contract; where the cooperation is withheld, the recalcitrant party is estopped from availing himself of his own wrong doing.”
The court went on to say that had the lease stated expressly that the owner was not required to furnish the information, the owner would prevail in this case. However, the lease was silent, and the court ruled in favor of the tenant.
Written by Jeff Marks, Legal Counsel, Northeast Florida Association of Realtors® (NEFAR).
Reprinted with permission from author Jeff Marks and NEFAR News, July 2007 edition, a publication of the Northeast Florida Association of Realtors (NEFAR).