Compliance with Lease Option to Renew and Notice in Illinois

| March 27, 2018
By: Evan Sauer
877-809-4567 x2

Make sure you strictly comply with the lease notice provisions for exercising an option to renew and extend in Illinois.

On February 28, 2018, the Illinois Appellate Court, in the case of Michigan Wacker Associates, LLC v. Casdan, Inc., 2018 IL App (1st) 171222, held that a tenant’s proposal e-mail did not constitute unequivocal, unconditional notice that the tenant was exercising its extension option and that actual or oral notice was insufficient. The tenant failed to exercise its option to extend the lease term pursuant to the lease.

It appears from this case that depending upon the terms of the lease, in providing notice to exercise an option to renew, a tenant should consider: (1) timing; (2) method of delivery; and (3) content of notice.

The contractually mandated time for performance is generally an essential term of a lease. The seminal decision in Dikeman v. Sunday Creek Coal Co., 184 Ill. 546 (1900), remains the leading authority on this matter. Unless that term is waived, an option is lost due to untimeliness. The court in Michigan Wacker went on to explain that “actual or oral notice is insufficient to exercise an option where a party has failed to provide timely written notice.” 

The lease terms will often provide for type of delivery of an option notice. Whether it needs to be delivered by certified mail, regular mail, e-mail or the like, a tenant needs to ensure it is delivering the notice as required. If the lease does not state the means for delivery, it is always a good idea to send certified mail, return receipt requested as well as e-mail with a delivery receipt. 

As for the content of the notice itself, an acceptance of an offer contained in an option must be specific, certain, and unconditional. The lease terms may even provide for the exact language needed to exercise the option. In the absence of such terms, words like “[T]enant hereby gives landlord this Extension Notice that Tenant has elected to exercise the First Extension Option granted in the Lease and does so with respect to the entire Demised Premises”, as provided in Michigan Wacker would certainly suffice as specific, certain, and unconditional. Words like tenant “would like to exercise the second option now” do not purport to unconditionally exercise an option.

If you are a tenant looking to extend your lease, make sure you strictly comply with the lease provisions. Also, a landlord and tenant often overlook the importance of drafting an appropriate notice provision, so when entering into a lease, you may want to consult with a lawyer.

Evan Sauer is a real estate attorney at Reda & Des Jardins, LLC a forward-thinking, technologically savvy law firm providing top-notch legal services to clients ranging from startups to large companies in a variety of industries. R&D's practice includes businessreal estate, litigation, and estate planning


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