Was Exercising an Option to Renew a Commercial Lease by Email Valid?

In the recent case of Kegran Pty Ltd v Warrik Pty Ltd (2018) NSWSC 1357, the Supreme Court had to determine whether there had been a valid exercise of an option to renew a commercial lease even though the method used did not appear to meet the conditions set out in the contract. The lessor had challenged the exercise of an option on the basis that the notice had not been properly served.

The tenant had an option to renew a lease for a further five years by giving at least six months notice before the expiry of the lease. The tenant sent an email to the lessor, within the required period, saying "please accept this as us wishing to take up the next 5-year option." There was a separate clause dealing with notices generally that stated all notices should be sent to the landlord at the address in the lease. While the email satisfied the requirements in respect of both form and timing, the centre manager’s address was not listed in the lease. However, the Court held this did not invalidate the exercise stating that the provisions were not to be strictly applied to the exclusion of all other methods of service. The Court ordered the specific performance of the option to renew. 

This case illustrates that, whether a lessee has validity exercised an option for renewal, may depend on the interpretation of the terms of the lease when read in the round.

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