Put simply, an option to renew in a lease is exactly that - an option for you as the Tenant, to renew the lease for another term when your existing lease expires. An option is very important for business continuity, just think what would happen if you suddenly found out that you had to find new business premises at the end of the month! But to exercise your option correctly requires careful consideration of the terms of the lease.
Generally, an option to renew can only be validly exercised if the following points are satisfied:
- Notice must be served on the landlord pursuant to the timeframe stated in the lease (for example no earlier than 6 months before the expiry of the lease, and no later than 3 months before the expiry of the lease)
- Rent and outgoings payable by you as the tenant must be up to date
- All your other obligations as tenant under the lease must be fulfilled and comply with the lease.
The content of the notice and the manner in which it is served on the landlord is of particular importance. The notice should be in writing and the words used must be clear and unequivocal and must not indicate any ambiguity. The notice should be addressed to the landlord and served in a way pursuant to the terms of the lease. Section 170 of the Conveyancing Act NSW 1919 lists some sufficient ways to serve a notice, for example:
- Delivering the notice personally (to the landlord)
- Leaving the notice or sending the notice by post to the last known residential or business address of the landlord
In the case of Kavia Holdings Pty Limited v Suntrack Holdings Pty Limited  NSWSC 716 the Supreme Court was faced with whether an email, including its content, sufficiently constituted notice of exercising an option. The Court held that in some circumstances an email can constitute sufficient notice so long as its contents are clear and the sender’s name and email address are clearly identifiable. However in the case, the tenant had failed to provide a clear intention to exercise the option via email.
As tenant, the responsibility of exercising the option falls on you. By failing to exercise your option properly and promptly you risk the landlord denying your option and ending the lease…leaving you possibly out of options!
This article is general information only and should not be relied on without obtaining further specific information.