Siarah Atlanta Hwy, LLC v. New Era Ventures, LLC
828 S.E.2d 4, 350 Ga. App. 59 (2019)
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Rule of Law:
When a tenant properly exercises an option to purchase contained within a lease, the landlord-tenant relationship is converted into a vendor-vendee relationship, rendering any subsequent attempt by the landlord to terminate the original lease ineffective. Furthermore, a formal tender of the purchase price is not required to obtain specific performance if the seller's actions indicate such a tender would be futile.
Facts:
- On May 1, 2015, Siarah Atlanta Hwy, LLC (Siarah) leased commercial property to New Era Ventures, LLC (New Era) for a ten-year term.
- The lease contract gave Siarah the right to terminate the lease for any reason with 30 days' written notice.
- In exchange for a payment of $175,000, the lease also granted New Era an option to purchase the property, exercisable by providing written notice at least 90 days prior to closing.
- The option period was specified as being between 9 and 48 months from the lease's commencement date.
- On January 27, 2017, New Era sent Siarah written notice that it was exercising its option to purchase the property.
- On the same day, January 27, 2017, Siarah sent New Era a notice stating it was terminating the lease, effective in 30 days.
- Following its exercise of the option, New Era scheduled a closing for May 12, 2017.
- Siarah's counsel informed New Era's counsel that it considered the option to have expired, the lease to be terminated, and demanded that New Era vacate the premises.
Procedural Posture:
- Siarah filed a petition for a writ of possession against New Era in the Magistrate Court of Forsyth County.
- New Era filed a counterclaim seeking specific performance of the option-to-purchase provision.
- The case was transferred first to the Superior Court of Forsyth County, and then to the Superior Court of Gwinnett County.
- Siarah amended its complaint to assert claims for breach of contract and slander of title.
- The parties filed cross-motions for summary judgment in the Superior Court of Gwinnett County.
- The trial court granted summary judgment to New Era, ordering specific performance, and also ruled that Siarah was entitled to funds New Era had paid into the court registry.
- Both parties appealed the trial court's order to the Court of Appeals of Georgia.
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Issue:
Does a tenant's exercise of an option to purchase property, made before the effective date of a landlord's notice of lease termination, convert the relationship to that of a vendor and vendee, thereby preventing the lease termination from taking effect?
Opinions:
Majority - McFadden, Presiding Judge
Yes. A tenant's exercise of an option to purchase transforms the landlord-tenant relationship into a vendor-vendee relationship, thereby nullifying a landlord's attempt to terminate the lease if the termination has not yet become effective. Here, New Era exercised the option on January 27, 2017. Siarah's notice of termination, sent the same day, required a 30-day notice period and would not have become effective until February 26, 2017. By exercising the option before the termination's effective date, New Era's legal status 'metamorphosed' from tenant to purchaser in possession. Consequently, there was no longer a landlord-tenant relationship for Siarah to terminate. The court also held that tender of the purchase price, normally a prerequisite for specific performance, was excused because Siarah's communications made it clear that any such tender would be rejected, thus constituting a waiver.
Analysis:
This decision clarifies the legal priority between a tenant's right to exercise a purchase option and a landlord's right to terminate a lease. It establishes that the exercise of the option is a transformative legal event that preempts a termination notice that has not yet taken effect. This precedent protects tenants who have paid substantial consideration for an option to purchase from having that right undermined by a landlord's last-minute termination. The ruling also reinforces the 'waiver of tender' doctrine, confirming that a party seeking specific performance is not required to perform a futile act when the opposing party has already repudiated the contract.
