A federal judge in Maryland has ruled that a commercial lease amendment clearly stating that the “original term” of the lease was being extended did not have that effect at all.
The opinion in Samuel, Son & Co. (USA) Inc. v. SC Property LLC relates that Samuel leased from SC 65,000 square feet of warehouse space and 40 parking spaces at a location in central Baltimore City, near Interstate 95 and M&T Bank Stadium.
Under the lease, Samuel had a right to renew once, for an additional two-year term, when the “original term” expired. In 2022, as expiration neared, Samuel submitted a “Notice of Intent to Exercise Option to Renew” expressing its “intent to exercise the option to renew pursuant to Section 3.2 of the” lease. Related correspondence referred to the renewal provision and the fact that Samuel was exercising its renewal right. Ultimately, a term sheet was created, and it, too, stated that Samuel was “exercising one (1) two (2) year option to renew.”
Pretty straightforward — but this is where things got tricky. The parties entered into a “Lease Amendment” ostensibly intended to formalize the renewal. But this amendment stated:
The Lease is hereby amended such that the original term of the Lease is extended for a period of two (2) years. … From and after the Effective Date of this Lease Amendment, all references in the Lease to the original term of the Lease shall be deemed and construed to include the Extension Term ….
That is, the amendment purported to do something completely different from the run-of-the-mill lease renewal that the parties had discussed at length: It purported to keep the original term going for an additional two years and thus — according to Samuel — preserve Samuel’s right to an(other) automatic two-year renewal term when the now-lengthened “original” term expired. None of which bears any resemblance to the notice, correspondence, and term sheet that preceded the amendment.
When Samuel eventually contacted SC’s successor to invoke its renewal right, the successor rejected its request on the basis that what occurred in 2022 was the renewal, and Samuel was not entitled to another.
Litigation ensued, and the U.S. District Court for the District of Maryland focused on the original renewal provision and the signed term sheet, not on the discordant language in the amendment. The court called Samuel’s reliance on the “original term … is extended” language in the amendment “specious” and did not mince words regarding Samuel’s conduct, stating: “If the text of the Lease Amendment were construed to say what Samuel now contends, then Samuel engaged in chicanery in preparing the Lease Amendment.”
There are lessons here for tenants and landlords: Ask for what you want, not something else. If you asked for something and you got it in a term sheet, the agreement should match. If you are asked to sign a formal contract after agreeing to a term sheet, for Pete’s sake, read the contract and make sure it says what it’s supposed to say.
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