The Requirement to Duly and Regularly Pay Rent as a Condition Precedent to a Lease Renewal Option

Abstract

Frequently options to renew a lease at the expiry of the original term stipulate that the tenant's right to exercise the renewal is dependent upon satisfactory past performance of the covenants contained in the lease. Courts have interpreted these stipulations as conditions precedent which must be strictly satisfied; the party relying on the option bears this onus. An important condition precedent is the requirement that the tenant has 'duly and regularly' paid the rent. The meaning of 'duly' has been interpreted to require that there is no unremedied default, either when the option is exercised or when the renewal term begins, and punctuality is not required. Two seemingly opposed interpretations of 'regularly' have surfaced. From a practical standpoint, the author suggests the same result may be reached by either interpretation, as the critical issue in either case is whether the failure to pay rent in accordance with the lease is trivial and inadvertent. Two arguments are often advanced to suggest the landlord has waived, or is estopped from relying on strict compliance with the conditions precedent. First, the author suggests that continued acceptance of rent or overdue rent is not a waiver of the conditions precedent to the renewal option by the landlord. Second, the author suggests that the landlord does not owe a duty to warn the tenant that a breach of the lease has occurred. Mere failure to warn is not equivalent to expressly communicated waiver. Practical suggestions for landlords, tenants and their legal counsel are provided based on the findings in the article.