Settlement Terms Didn't Supersede Lease Requirements

Facts: A car wash tenant signed a lease with a renewal option every five years. The tenant exercised its renewal option twice. During the second renewal period, a dispute between the tenant and owner was settled by a court. The settlement stated that the tenant could operate until the owner found a replacement tenant. Several years went by with no replacement tenant. In the meantime, the tenant didn’t exercise its option for a third term, but it continued to operate at the property on a holdover basis.

When the owner notified the tenant that the lease would terminate because it hadn’t been renewed, the tenant contended that the later-drafted settlement modified or “superseded” the renewal notice provisions in the lease. That is, the settlement provided that the tenant was entitled to operate there until a replacement tenant was found. The owner argued that the tenant remained obligated to notify the owner of its intent to extend the term of the lease even while it searched for a new tenant.

The owner sued to evict the tenant, asking the court for a judgment in its favor without a trial. After the court ruled in favor of the owner, the tenant appealed.

Decision: A Missouri trial court upheld the lower court’s ruling.

Reasoning: The court determined that the settlement terms didn’t supersede the lease’s notification and renewal requirements. Therefore, the tenant was obligated to notify the owner in writing that it intended to extend the lease term another five years. The court disagreed with the tenant that the settlement language indefinitely extended the term of the lease, providing it with a right to lease the premises until the owner found a replacement tenant. The court concluded that the settlement “specifies the parties will perform according to the lease” and that language “negates the tenant’s argument that the settlement removes the necessity for the tenant to follow the terms of the lease.”

• Car Wash Specialties, LLC v. Turnbull, June 2015