THIRD DIVISION May 31, 2006

No. 1-05-3295

SAMUEL OLIVA and JAYE VACALA REVOCABLE TRUST, Plaintiffs-Appellants,

v. AMTECH RELIABLE ELEVATOR COMPANY and OTIS ELEVATOR COMPANY, Defendants-Appellees. ) ) ) ) ) ) ) ) ) ) ) Appeal from the Circuit Court of Cook County

Honorable Barbara J. Disko, Judge Presiding.

JUSTICE KARNEZIS delivered the opinion of the court: Plaintiffs Samuel Oliva and the Jaye Va cala Revocable Trust filed a breach of contract action against their tenants, def endants Amtech Reliable Elevator Company (Amtech) and Otis Elevator Company (Oti s), Amtech's lease assignee, seeking damages for defendants' alleged breach of the parties' agreement to extend an office lease for an additional three-year term. The circuit court dismissed the action pursuant

to section 2-615 of the Illinois Code of Civil Procedure (735 ILCS 5/2-615 (West 2004)), finding plaintiffs failed to state a cause of action because defendants had not accepted the option to extend the lease for an additional th ree years in writing. Plaintiffs appeal,1-05-3295

2 arguing that (1) the court erred in finding t he lease required defendants ' written notice of intent to exercise their option to extend t he lease and (2) in the absence of a written notice requirement, defendants exercised thei r renewal option by paying the increased

rent associated with the second renew al term. We reverse and remand. Background The well-pleaded facts in plaintiffs' amended complaint show that on August 17, 1993, plaintiffs entered into a lease with Am tech, agreeing to lease Amtech an office suite for six years. On February 6, 1999, pl aintiffs sent a letter to Amtech, confirming that Amtech wished to extend its lease for a three-year term. The letter was to be considered a rider to the original lease and all terms of the new lease period would be "exactly the same as [Amtech's] original lease except for the following [in salient part]: 1. The original lease is extended for three additional years as follows: A. September 1, 1999 thr ough August 31, 2000 $3,864.12 B. September 1, 2000 thr ough August 31, 2001 $4,057.33 C. September 1, 2001 thr ough August 31, 2002 $4,260.20 2. Amtech Reliable Elevator has an additional three year option as follows: A. September 1, 2002 thr ough August 31, 2003 $4,473.20 B. September 1, 2003 thr ough August 31, 2004 $4,696.87 C. September 1, 2004 thr ough August 31, 2005 $4,931.71." Amtech signed the rider on April 1, 1999. Amtech continued to occupy the premises and paid plaintiffs the increasing m onthly rent as specified for each of the1-05-3295

3 three years of the 1999-2002 extension. On September 1, 2002, upon expiration of the original three-year extension, Amtech began paying $4,473.20 per month, the increased monthly rent due for the first year of the optional three-y ear extension. Amtech paid this amount for 12 months. In August 2003, Amtech assigned the lease and its extensions to Otis. On September 1, 2003, Amtech began paying $4,696.87 per month, the increased monthly rent due for the second year of the optional extension. On December 1, 2003, Otis notified plaint iffs by letter that it would be vacating the premises effective January 31, 2004. Otis stated that the lease expired on August 21, 2002, and that Otis, as Amtech's assi gnee, had been occupying the premises as a

month-to-month tenant. Plaintiffs filed for breach of contract, alleging when Amtech began to pay plaintiffs the $4,473.20 specified as the rent due for t he first year of the optional extension Amtech exercised its option to extend the l ease for a second three-year period through August 31, 2005, and Otis breached the leas e and extension when it vacated the premises before August 31, 2005. Plaintiffs sought to recover rent for the balance of the three-year extension.

Defendants filed a combined motion to dismiss the amended complaint pursuant to sections 2-615 and 2-619(a)(7) of the I llinois Code of Civil Procedure (735 ILCS 5/2- 615; 2-619(a)(7) (West 2004)). Defendants asse rted, pursuant to section 2-615, that plaintiffs failed to state a cause of action for breach of contract because written notice1-05-3295

4 was required to exercise the optional extension and defendants provided no such written notice; a lease option provision is a privilege belonging to the tenant and is not enforceable by the lessor; defendants were hol dover tenants with the right to terminate the lease with 30 days notice, which they pr operly did; and plaintiffs seek future accruing rents in violation of Illinois law. Defendants also argued, pursuant to section 2- 619(a)(7), that the alleged second three-y ear extension was unenforceable because it did not comply with the statute of frauds (740 ILCS 80/1 (West 2004)). The court dismissed the amended complain t pursuant to section 2-615 of the Code, finding the lease required written notice of an intent to exercise the extension option and, because plaintiffs concede defendants did not give such notice, plaintiffs failed to allege their performance of the cont ract and thus failed to state a cause of

action for breach of contract. The court deni ed plaintiffs' motion for reconsideration and plaintiffs appealed. Analysis A section 2-615 motion to dismiss is based on the pleadings rather than the underlying facts, admits all well-pleaded facts on the face of the complaint and attacks the legal sufficiency of the complaint, allegi ng only defects on the face of the complaint. Neppl v. Murphy , 316 Ill. App. 3d 581, 584, 736 N.E.2d 1174, 1178 (2000); Elson v. State Farm Fire & Casualty Co. , 295 Ill. App. 3d 1, 6, 691 N.E.2d 807, 811 (1998). Viewing the complaint in the light most favo rable to the nonmoving party, here plaintiffs, we must determine whether the complaint all eges facts sufficient to state a cause of1-05-3295

5 action upon which relief may be granted ( Ziemba v. Mierzwa , 142 Ill. 2d 42, 46-47, 566 N.E.2d 1365, 1366 (1991)) and do not consi der the merits of the case ( Elson , 295 Ill. App. 3d at 5, 691 N.E.2d at 811)). In maki ng that determination, we take as true all well-pleaded facts of the complaint, drawing a ll reasonable inferences therefrom in favor of the nonmoving party and disregarding mere conclusions of law unsupported by specific factual allegations. Krueger v. Lewis , 342 Ill. App. 3d 467, 470, 794 N.E.2d 970, 972 (2003); Ziemba , 142 Ill. 2d at 47, 566 N.E.2d at 1366. Our standard of review

is de novo

. Neppl , 316 Ill. App. 3d at 583, 736 N.E.2d at 1178.

A lease is a contract between landl ord and tenant and rules of contract construction apply to the construction of leases. Williams v. Nagel , 162 Ill. 2d 542, 555, 643 N.E.2d 816, 822 (1994). In order to state a cause of action for breach of contract, plaintiffs must allege the existence of a valid and enforceable contract, substantial performance by plaintiffs, breach of the cont ract by defendants and resultant injury to plaintiffs. W.W. Vincent & Co. v. First Colony Life Insurance Co. , 351 Ill. App. 3d 752, 759, 814 N.E.2d 960, 967 (2004). The court found plaintiffs failed to state a cause of action because (1) the lease required Amtech to notify plaintiffs in writi ng of its exercise of the option to extend the lease for an additional three-year term and (2) plaintiffs conceded Amtech did not give such written notice. Contrary to the cour t's finding, neither the lease nor the rider requires Amtech to give notice in writing of its intention to exercise its option to extend the lease. In fact, there is no requirement in either agreement that Amtech give any1-05-3295

6 notice whatsoever of its int ention regarding the option. Defendants assert that provision 18 of the lease, relied on by the court, states a written notice requirement for exercise of t he option to extend. The provision provides "any notices required or permitted to be giv en under this Lease shall be effective only if given in writing." However, besides t he quoted provision, which refers to notice generally, the lease contains no requirement that Amtech must provide notice of its intent to exercise an option to extend. 1 Similarly, the rider contains no requirement that defendants provide notice of their intent to exercise the opti on to extend. In fact, the rider makes no mention of notice at all, requi site or otherwise. Accordingly, because

neither the lease nor the rider required Amtech to provide any notice of its intent to exercise the option, no written notice of exercise of the option was required.

1 The lease originally contained a writt en notice requirement for exercise of an option to extend. However, presumably because the underlying lease did not contain an option to extend, the notice provision wa s scratched out. It was not reinstated when the rider subsequently provided for an option to extend. Since neither the lease nor the ri der states a notice requirement, the question becomes whether the law requires some type of written or verbal notice of an exercise1-05-3295

7 of an option to extend a lease where the agreement between the parties setting forth the option is silent regarding notice. It does not. An option to extend the term of a lease is not an obligation; rather, it is a privilege belonging to the tenant, without any corresponding right or privilege in the landlord. T.C.T. Building Partnership v. Tandy Corp. , 323 Ill. App. 3d 114, 119, 751 N.E.2d 135, 140 (2001). Where, as here, a tenant has the privilege of extending the term of a lease, as distinguished from renewing a lease, no notice of the tenant's election is required in the absence of a stipulation requiring such notice, "merely remaini ng in possession being sufficient notice." Vincent

v. Laurent , 165 Ill. App. 397, 403 (1911). The hol ding over by the tenant operates as

sufficient notice to the landlord that the t enant has elected to exercise its option. Smith v. Bradley , 336 Ill. App. 272, 274-75, 83 N.E. 2d 365, 366 (1949). Moreover, any requirement that a tenant notif y a landlord of the tenant's in tention to exercise an option

to extend a lease inures to the benefit of the landlord and thus can be waived by the

landlord. Tandy Corp. , 323 Ill. App. 3d at 120, 751 N.E. 2d at 140. Unless the facts show otherwise, by accepting the increased rent al, plaintiffs waived any notice to which they might have been entitled. When Amtech remained in possession of the premises after expiration of the first three-year extension and paid the increased rent required under the option to extend the lease for a second three-year term, barri ng evidence to the contrary, it exercised that option to extend for the stated term. As a basic proposition, a landlord's accept ance of rent after the expiration of a1-05-3295

8 lease containing an option to renew but no provision as to how or when that option was to be exercised creates a tenancy from year to year. Butz v. Butz , 13 Ill. App. 3d 341, 299 N.E.2d 782 (5th Dist. 1973). However, where, as here, the option provided for increased rent to be paid during its term and the tenant paid that increased rent, we find that the tenant has exercised its option to extend for the stated term, in this case three year s. " '[A] tenant who holds over after the expiration of his term may, at the election of the landlord, be held to be either a trespasser or tenant for another similar term.' [ Commonwealth Building Corp. v. Hirschfield , 307 Ill. App. 533, 536, 30 N.E.2d 790, 792 (1940).] To constitute a 'holding over' so as to trigger the landlord's option, the tenant's continued possession of the premises 'must be voluntary,' that is, the action of the tenant must 'disclose the right of t he landlord to assume an intention on the tenant's part to create a second tenancy.' [ Hirschfield , 307 Ill. App. at 536, 30 N.E.2d at 792.]" Hoffman v. Altamore , 352 Ill. App. 3d 246, 250-51, 815 N.E.2d 984, 988 (2004). On the facts of the complaint, it was reasonabl e for plaintiffs to assume that Amtech affirmatively indicated its intent to exerci se the option by staying on the premises and paying the higher rent due under the option. Clearly, when a tenant voluntarily continues to possess the premises and pays t he higher rent specified under an option to renew, the landlord can assume from this action that the tenant intends to create another tenancy, the tenancy cove red by the option.1-05-3295

9 This is especially true where, as here, the tenant cannot be considered merely a

month-to-month holdover tenant. Notwit hstanding defendants' argument to the contrary, the amended complaint does not support their assertion that they are merely

month-to-month holdover tenants under the lease. Provision 23.8 of the lease defines "Holding Over" as follows: "Any holding over after the expiration of the Term with the

consent of the Landlord shall be construed to be a tenancy from month to month at the Rent payable during the final full lease year (prorated on a monthly basis)." Amtech does not meet these parameters. Although it remained on the premises after expiration of the first three-year extension, it did not continue to pay the rent it had been paying during the last year of that lease extension. Rather, it began paying the higher monthly rent due for the first year of the optional three- year extension, as set out in the rider, and continued to pay that amount for the next 12 m onths. Accordingly, after expiration of the three-year extension, Amtech did not become a month-to -month holdover tenant under the lease. Instead, barring evidence of a contrary intention, Amtech continued its tenancy under the optional three-year extensi on of the lease when it exercised that option by remaining on the premises and payi ng the higher rent specified as due under the option. As the court noted, no Illinois case has s pecifically held that, in the absence of a notice requirement, a tenant's continued po ssession of premises and payment of the increased rent specified in an optional lease extension operate as an exercise of that option. The single case precisely on point, Harris v. Gindes , 265 A.2d 598 (D.C.App.1-05-3295

10 1970), is from another jurisdiction. In Harris, as in the case at bar, a lease provided the tenant with an option for an additional term at an increased rent. The option contained no notice requirement and the tenant gave no not ice before remaining in possession of the leased premises and paying the increased rent. The court held that the tenant affirmatively indicated his intent to exerci se the lease option for an additional two-year term by remaining in possession of the l eased premises and paying the increased rent required by the option. Gindes , 265 A.2d at 599. The court noted that, even if the tenant was required to give some form of notic e of his intention prior to or concurrent with expiration of the original term, such notice would be for the landlord's benefit and could be waived by the landlord. Gindes , 265 A.2d at 599. By accepting the increased rent, the landlord waived notice "and both he and the tenant were obligated for the

renewal term." Gindes , 265 A.2d at 599. The same applies here. The amended complaint sufficiently alleged t hat Amtech exercised its option to extend the lease for an additional three-year term when it remained in possession of the premises and paid the increased rent and t hat Otis breached the extension agreement when it vacated the premises before that term expired. The court erred in dismissing the amended complaint for failure to state a cause of action on this basis.

Statute of Frauds Defendants argue alternatively, pursuant to section 2-619(a)(7) of the Code, the complaint should be dismissed because the a lleged agreement to extend the lease for a second three-year term fails to comply with the statute of frauds. The court did not1-05-3295

11 address this issue, having dismissed the compla int for failure to state a cause of action, but we may affirm the court on any basis in the record. Park Superintendents' Professional Ass'n v. Ryan , 319 Ill. App. 3d 751, 757, 745 N.E.2d 618, 624 (2001). Subject to de novo review, a section 2-619 motion to dismiss admits the legal sufficiency of the complaint and raises defec ts, defenses or other affirmative matters, such as noncompliance with the statute of fr auds, which avoid the legal effect of or

defeat a claim. Borowiec v. Gateway 2000, Inc. , 209 Ill. 2d 376, 383, 808 N.E.2d 957, 962 (2004). Interpreting all pleadings and supporting documents in the light most favorable to the nonmoving party, the defec t, defense or affirmative matter must be apparent on the face of the pleading attacked or be supported by affidavit. Borowiec , 209 Ill. 2d at 383, 808 N.E.2d at 962. The statute of frauds provides in salient part: "No action shall be brought, * * * upon any agreement that is not to be performed within the space of one year from the making thereof, unless the promise or agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith * * *. " 740 ILCS 80/1. Defendants posit that any agreement to ext end the lease for a second three-year term could not be performed within the space of one y ear, either from the date of the rider or from the date the first three-year extensi on expired and, therefore, such an agreement

would violate the statute of fr auds unless it is in writing. Defendants argue that the rider1-05-3295

12 is, in salient part, merely an option to ext end the lease for a second time which had to be accepted in writing and, because they never agreed in writing to exercise that option, plaintiffs' claims are barred by the statute of frauds.

"Where the extended term of the lease is fixed in the original lease and comes into existence by the exercise of the opti on and the giving of the required notice, lessee holds for the extended term by virtue of the original lease which is in writing and satisfies the statute [of frauds]. [Citation.] This rule may apply even where the notice of intention to exercise the option is verbal." Kaybill Corp. v. Cherne , 24 Ill. App. 3d 309, 321, 320 N.E.2d 598, 608 (1974). As discuss ed previously, the parties' agreement contained no requirement that t he option be accepted in writing. In the absence of a written notice requirement, the option coul d be accepted verbally or, as here, by Amtech's voluntary action manifesting its ex ercise of the option. The lease and rider satisfied the statute of frauds, being memoria lized in a writing signed by the parties. Incorporated within these writ ings is the option to extend the lease, which Amtech exercised by holding over and paying the increased rent due for the new term. Defendants held possession of the premises by virtue of the original lease and rider which were in writing and sati sfied the statute of frauds. Kaybill Corp. , 24 Ill. App. 3d at 321, 320 N.E.2d at 608. For the reasons stated above, we reverse the decision of the circuit court and remand for further proceedings.

Reversed and remanded.1-05-3295

13 HOFFMAN, P.J., and ERICKSON, J., concur.