Is there a difference between an option to renew and an option to extend a commercial lease in Wisconsin? Commercial landlords and tenants alike should be aware that in order to exercise an option to renew, a new lease must be executed. However, an option to extend a lease does not require a new lease agreement.
The technical distinction between an option to renew or extend is important to understand because of the possible consequences if a dispute should arise. A recent Court of Appeals case confirmed the distinctions when it denied a landlord's claim to terminate a lease arrangement.
A dispute arose over the language of the lease agreement. Did the lease contain an option to renew or an option to extend? The landlord argued that its lease contained an option to renew. Because a new lease had not been executed in several years, it argued it had the authority to terminate the lease arrangement on thirty-day's notice. The tenant, a commercial billboard company, argued the agreement included an option to extend provision. Because no new agreement was necessary, it argued that its multi-year lease was valid.
The Court sided with the tenant in finding that the operable clause was an option to extend, with no new agreement required for extending the term of the lease.
The outcome of the case has a significant impact on both landlord and tenant. The landlord is an Estate in the immediate process of conveying property in St. Croix Falls, Wisconsin to a national big box retailer, while the tenant is a regional billboard company now entitled to compensation for the extended term of the lease, if the lease is to be bought out.
For more information regarding leases and other commercial real estate issues, please contact Nick Vivian at 651-379-3080.
