“The best-laid schemes of mice and men often go awry.” – Robert Burns
Robert Burns might as well have been writing about commercial leases. Commercial landlords and tenants can spend months negotiating and drafting comprehensive
written lease agreements. No matter how much effort the parties and their attorneys invest in the contracting process, disputes often arise down the road. The following
are common problems with commercial leases that can lead to litigation and tips to avoid those problems.
“Agreements to agree” and “agreements to negotiate” are unenforceable under Minnesota law. Parties must agree on all material terms to have an enforceable contract. In the commercial lease context, enforceability can be a problem with respect to options to continue the lease after its initial term expires. Lease options fall into two categories – options to extend and options to renew. An option to extend continues the lease on the same terms. An option to extend is enforceable. An option to renew, on the other hand, provides that different terms will apply to the renewal period. An option to renew is unenforceable unless the parties agree to the renewal period terms at the time they enter into the lease. Merely using the words “option to extend” is not enough to create an enforceable option. For the option to be enforceable, the lease must clearly state what the terms of the lease will be once the option is exercised.