R & R of Connecticut, Inc. v. Stiegler
1985 Conn. App. LEXIS 1020, 493 A.2d 293, 4 Conn.App. 240 (1985)
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Rule of Law:
Equity will relieve a tenant from the consequences of failing to give timely notice of a lease renewal option if the failure was due to mere neglect rather than willful or gross negligence, the delay was slight, the loss to the landlord caused by the delay was small, and enforcement of the condition would result in unconscionable hardship to the tenant.
Facts:
- On June 13, 1979, the defendant landlord leased commercial property to Pedro Ortiz, who later assigned the lease to the plaintiff tenant for the operation of a supermarket.
- The lease, set to expire on December 31, 1984, contained an option to renew for five years, exercisable only by written notice to the landlord at least twelve months prior to expiration, making the deadline December 31, 1983.
- The plaintiff's attorney, Arnold E. Bayer, who was purportedly responsible for handling the renewal, died on December 14, 1983, shortly before the renewal deadline.
- The plaintiff failed to provide the required written notice by the December 31, 1983 deadline.
- In March 1983, the defendant had entered into a sales agreement with McDonald's Corporation for $425,000, contingent on delivering the property free of all tenancies.
- The plaintiff had invested significantly in the property, including $40,000 in investments and a $390,000 Small Business Administration loan for equipment.
- On January 26, 1984, the defendant notified the plaintiff that the lease would terminate due to the failure to exercise the renewal option.
- On February 6, 1984, the plaintiff's new counsel contacted the defendant, explained the prior attorney's death, and requested to exercise the option.
Procedural Posture:
- The plaintiff tenant sued the defendant landlord in the trial court, seeking an injunction to prohibit the termination of the lease.
- The defendant landlord filed a counterclaim seeking a declaratory judgment that the lease would expire.
- The trial court found in favor of the plaintiff tenant, ruling that the lease renewal option had been properly exercised on equitable principles.
- The defendant landlord appealed the trial court's judgment to this court.
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Issue:
Does equity excuse a tenant's failure to provide timely written notice to renew a commercial lease when the tenant alleges its attorney's death caused the oversight, the tenant would suffer substantial financial loss from forfeiture, and the landlord has a separate, lucrative offer to sell the property?
Opinions:
Majority - Hull, J.
No, equity does not excuse the failure on the current record because the trial court failed to make a necessary finding regarding the tenant's degree of negligence. A court may grant equitable relief for a tenant's failure to timely renew a lease only after applying the three-part test from F. B. Fountain Co. v. Stein. This test requires findings on: (1) whether the tenant's failure was mere neglect or willful/gross negligence; (2) whether the delay was slight; and (3) whether the loss to the landlord was small. Here, the trial court erred by failing to make a specific finding on the first prong—the degree of the plaintiff's negligence—which is a necessary predicate to granting relief. The court also erred in its analysis of the third prong by considering the landlord's potential loss from the failed McDonald's deal; the only relevant loss is prejudice to the landlord caused directly by the tenant's delay in giving notice. Because the trial court did not properly conduct the required analysis, its judgment granting relief is set aside and the case is remanded for a new trial.
Analysis:
This decision reaffirms and clarifies the three-part test for granting equitable relief against forfeiture of a lease renewal option. It establishes that the 'loss to the lessor' must be directly caused by the tenant's delay, not by the landlord's loss of a separate, more profitable opportunity that arose independently. This prevents landlords from using a tenant's minor, negligent error as a pretext to terminate a lease for opportunistic reasons. The ruling also heightens the evidentiary burden on the party seeking relief, demanding a concrete factual finding on the degree of negligence rather than accepting speculation about a deceased party's intentions.
