By Andrea J. Lawrence
Partner, LeClairRyan
Concepts of equity are important in commercial real estate because the courts will, on occasion, rely on those concepts to avoid loss of a tenant’s interests in a lease. This scenario comes into play in situations where tenants haven’t properly exercised a renewal option, but may potentially have offset that shortcoming with major improvements to the premises or otherwise generated “goodwill” at the property.
For example, the case of 135 East 57th Street LLC v Daffy’s, Inc. saw the New York Appellate Division rely on equitable principles to protect a tenant that didn’t exercise a timely option to renew. Specifically, the Court decided that based on goodwill generated by the tenant, equity would intervene to prevent the loss of its leasehold interests.