Opinion ID: 1060646
Heading Depth: 1
Heading Rank: 3

Heading: exercise of the renewal option

Text: An option to renew a lease is a unilateral contract under which the lessee retains an irrevocable right to extend the lease during the option period. See American Oil Co. v. Rasar, 203 Tenn. 37, 45, 308 S.W.2d 486, 490 (Tenn.1957); Abou-Sakher v. Humphreys County, 955 S.W.2d 65, 68 (Tenn.Ct.App.1997). The right to renew will be lost, however, if the lessee fails to give timely notice in accordance with the terms of the option. See American Oil Co. v. Rasar, 203 Tenn. at 45, 308 S.W.2d at 490; Corim, Inc. v. Sam Blair Co., Inc., 721 S.W.2d 256, 260-61 (Tenn.Ct.App.1986). The lease in this case did not specify a time period within which City Sign was required to exercise the option to renew. The renewal provision merely provided that City Sign could renew the lease at the end of 10 years. The parties properly recognize that no Tennessee case has clarified the requisite time frame within which an option must be exercised if the lease provides only for renewal at the end of the original lease term. As the Court of Appeals acknowledged, a split of authority exists in other jurisdictions concerning construction of the option language in these types of leases. Relying on one line of cases, City Sign argues that the renewal provision's phrase at the end of 10 years does not mean prior to the end, and permitted it to exercise the option within a reasonable time after the expiration of the lease's original term. Because it exercised the option within ten days after the ten-year term of the lease had expired, City Sign contends that it complied with the reasonable time requirement and effectively renewed the lease. Citing a separate line of cases, Norton and LOA assert that the language at the end of 10 years required City Sign to exercise the renewal option within the original term of the lease. They assert that since City Sign did not give notice of renewal prior to the termination of the lease, the option to renew expired with the lease and was never properly exercised. After reviewing the cases espousing this view, we agree.