Brief Fact Summary. A tenant failed to invoke his option to renew by the date specified in the lease due to his own negligence.
Synopsis of Rule of Law. Where a tenant would suffer a forfeiture, he is entitled to equitable relief where the default has not prejudiced the landlord and it is a result of an honest mistake.
Since a long-standing location for a retail business is an important part of the good will of that enterprise, the tenant stands to lose a substantial and valuable asset.View Full Point of Law
Issue. Does a tenant, who failed to adhere to the terms of a lease due to its own mere negligence, but who will suffer forfeiture if removed from the premises, have a right to equitable relief?
Held. Yes. Judgment reversed and remanded.
The court found that the Defendant would have suffered forfeiture since it made substantial improvements to the property.
The court also found that the Defendant’s failure to renew the lease was due to “mere forgetfulness” and was not an intentional attempt to exploit a fluctuating real estate market.
The court found that it was unclear whether the Plaintiff suffered a prejudice from the Defendant’s oversight and therefore a new trial should be granted.
Dissent. Equitable relief is only granted in limited circumstances such as where fraud, mistake, or accident is involved, not mere negligence. The fact that tenant made substantial investment in the property is not sufficient, standing alone, to grant equitable relief.
Discussion. The court examined leading case law in the jurisdiction, which recognizes that although an option is ineffective if not invoked within the time specified, a tenant is entitled to equitable relief when he would suffer forfeiture. The court reasoned that because the Defendant had spent a considerable amount on improvements to the property, he would suffer forfeiture. The court went on to reason that even though the Defendant failed to inform the Plaintiff of his intention to renew due to his own negligence, the Defendant’s mistake was made in good faith and his loss would be out of proportion to the gravity of his oversight.