Question: Nearly five years ago we signed a lease for a 2,500 square foot office suite in a north Scottsdale office building. The five-year lease included an option to renew the lease for another five years, with six months’ notice prior to the expiration of the five-year lease. If the five-year lease is renewed, the only modification of the five-year lease would be a consumer price index (“CPI”) increase in the monthly rent. We want to stay in our office suite for another five years, especially with only a CPI increase in the monthly rent. Therefore, eight months before our lease expired, we told the landlord that we wanted to renew our lease for another five years, and that we also wanted an additional 1,000 square feet of office space and an additional four covered parking spaces in this new five-year lease. By emails the landlord agreed, and said that we would get the new five-year lease. In the last week before the six months expired, and with no new five-year lease, I emailed the landlord twice to ask when we would be signing the new five-year lease. No response. The day after the end of the 6-month notice for the option to renew the lease, we received a letter from the landlord’s attorney stating that we had failed to timely exercise the option to renew the lease for five years, and that we needed to move out in six months. We immediately emailed the landlord’s attorney that we wanted to exercise the five-year option to renew. Again, no response. Although we understand that there may or may not be a new lease with our landlord for the additional 1,000 square feet of office space and additional four covered parking spaces, will we have to move out in six months?
Answer: Probably not. In light of (1) the two months of negotiations between you and your landlord after you said that you wanted to renew the five-year lease, (2) the landlord’s failure to respond to your two emails in the last week, and (3) the delay of one day probably did not prejudice the landlord, you probably have exercised the option to renew the lease for five years with the CPI increase.
Note: You should hire a lawyer to negotiate for you. If negotiations fail, your lawyer would probably file a lawsuit for specific performance of the five year option to renew the lease, and record a Lis Pendens (Latin for “pending litigation”) to prevent your landlord from renting your 2,500 square feet of office space to another tenant.