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Patel v. 323 Central Avenue Corp.

A-3724-06T2 (N.J. Super. App. Div. 2008) (Unpublished)

LEASES; OPTIONS — When a tenant has an option within its lease to extend the term or to purchase the leased property, it must give unequivocal notice of its intention to exercise those options because merely sending a letter with an expression of interest to do so is insufficient.

A tenant entered into a lease agreement with a landlord for office space. The lease was to expire eighty-four months after the commencement date and gave the tenant an option to extend its term, and the right of first opportunity to purchase the property. After the tenant unsuccessfully attempted to exercise those options, he filed suit against the landlord, seeking specific performance and damages for breach of contract.

One year before lease expiration, the tenant wrote to the landlord expressing his interest in either purchasing the property for a set price, or renewing his lease for a ten year period. Ten months later, landlord responded by sending a proposed contract of sale containing a price that differed from the tenant’s offer and provided for a closing date three weeks after the date of the cover letter. The physician made no changes to the contract. Tenant then signed and returned the contract three days after the proposed closing date, with the required deposit. Two months later, landlord responded that it did not want to sell the property to tenant. Landlord then sold the property to another party. The Tenant sued for specific performance of the contract and for damages. The lower court found in favor of the landlord. It concluded that the Statute of Frauds barred tenant’s claims because the proposed written contract was never signed by landlord and that there was no clear and convincing evidence to show that the parties intended to enter into an oral contract, or that the existence of the written proposed contract manifested the parties’ intend to be bound by those terms.

The Appellate Division affirmed, holding that tenant could not prove the existence of a binding oral agreement. The proposed contract was never signed and the landlord’s cover letter did not indicate that it would be bound by the terms of the unsigned document. Rather, the letter simply asked for the tenant or his attorney review the contract and respond with any comments. The landlord never deposited the tenant’s check in an attorney trust account but ultimately returned it. As to tenant’s right to renew the lease, the Court found that tenant’s letter merely expressed a willingness to renew the lease and did not clearly state that he was exercising the option. The Court also held that, upon expiration of the lease, the tenant’s right to extend the lease, given that he was a holdover tenant, similarly expired.

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