When is an option to renew, not an option at all? When the language used by the parties is vague or ambiguous.
Typically, outside of rent regulation, tenants are not entitled to automatic lease renewals, unless the extension has been negotiated in advance and the parties' agreement clearly outlines the delineated terms or a procedure to arrive at the rent calculation has been set by the participants.
While Courts are frequently called upon to "interpret" agreements, they will usually not manufacture terms or conditions which were not previously reserved by the parties. A case in point is 188-90 Eighth Ave. HDFC v. Havana Chelsea Luncheonette, Inc. In that dispute, a judge was asked to decide whether a lease agreement--which had language requiring the parties to execute a new lease "with a new rental amount no less than 30 days prior to the end of the term of this lease"--contained an enforceable "option to renew."
After a nonjury trial, Judge Anil C. Singh, of the Civil Court of the City of New York, concluded that the agreement in question did not obligate the landlord to sign a new lease with the tenant (even at fair-market value). The absence of key language (such as a method for determining or calculating the rental amount) worked to the tenant's detriment. On appeal, the Appellate Term, First Department, concurred, noting as follows:
The clause provided no objective basis for determining the rental amount the parties intended tenants to pay upon renewal and thus constituted a "mere agreement to agree"...Contrary to tenants' contention, the "unamplified language" of the provision did not convey a commitment to be bound by the fair market rental value of the commercial premises...nor did it invite recourse to an objective extrinsic event, condition or standard to determine the rental amount....Thus, when a landlord and tenant are unable to agree (in advance) what the rental rate will be upon the lease's expiration, then some objective means of arriving at the figure should be negotiated. By way of example, if the parties had provided for a dispute-resolution mechanism (such as binding arbitration) to determine or assess the fair-market rental rate, that kind of language would likely have been given deference. [See, e.g., 166 Mamaroneck Ave. Corp. v. 151 East Post Road Corp., 78 N.Y.2d 88 (1991].
So, when it comes to lease renewals, playing it "fast and loose" could leave you optionless.
For a copy of the Appellate Term's decision in 188-90 Eighth Ave. HDFC v. Havana Chelsea Luncheonette, Inc., please click on the following link:
http://www.nycourts.gov/reporter/3dseries/2006/2006_50806.htm