Rent Obligations After Exercising Purchase Options in Commercial Leases

Updated on January 11, 2024

Rent Obligations After Exercising Purchase Options in Commercial Leases

At Schorr Law, our expertise in real estate law often involves litigating partition claims throughout California. A critical aspect of these claims is understanding rent obligations following the exercise of a purchase option in lease agreements. This article delves into the complexities of such situations, guided by recent legal precedents.

Understanding Lease Purchase Options and Rent Obligations

Lease purchase options are valuable tools in commercial real estate but can lead to complications without clear contractual language. We draw insights from two pivotal cases to clarify these complexities:

Case Analysis: Petrolink, Inc. v. Lantel Enterprises

• Key Ruling: In Petrolink, the court ruled that a tenant is released from further rent obligations once they exercise their purchase option. This decision was based on the principle of specific performance, aiming to restore the parties to the positions they would have been in if the contract had been performed on time.
• Legal Precedent: The court’s decision was influenced by the seminal case of Stratton v. Tejani, which established guidelines for adjusting equities between parties due to delayed performance.

Considerations for Lease Agreements with Purchase Options

• Contractual Clarity: It’s crucial to have explicit terms in the lease regarding rent obligations after exercising a purchase option.
• Potential for Contractual Variations: Parties can contractually agree to require rent payment even after exercising the purchase option, typically ending at the close of escrow.

Legal Implications and Strategies in Lease Purchase Options

Strategies for Tenants and Landlords in Lease Agreements

• Tenants should seek clarity on rent obligations post-exercise of purchase options.
• Landlords need to specify terms in the lease to avoid ambiguity and potential legal disputes.

Frequently Asked Questions About Lease Purchase Options

1. What Happens to Rent Obligations After a Purchase Option is Exercised?

• Typically, rent obligations cease once a tenant exercises their purchase option, as seen in Petrolink, Inc. v. Lantel Enterprises.

2. Can Parties Contract for Continued Rent After Exercising a Purchase Option?

• Yes, parties can agree that rent payments continue even after the purchase option is exercised, usually until the close of escrow.

3. How Do Courts Determine Adjustments for Delayed Performance?

• Courts may refer to precedents like Stratton v. Tejani to adjust equities between parties, considering factors like lost use of purchase money and profits from the property.

4. What is the Importance of Specific Performance in These Cases?

• Specific performance is crucial as it aims to place the parties in the positions they would have been if the contract was timely performed.

Contact Schorr Law for Expert Guidance on Commercial Lease Agreements For more information or to discuss your specific situation regarding lease purchase options and rent obligations, contact Schorr Law. Our experienced lease dispute attorneys in Los Angeles can provide valuable insights and legal assistance. Reach out to us for a free 30-minute consultation at info@schorr-law.com or (310) 954-1877.