Holdover Tenant Can’t Exercise Purchase Option Contained in Original Lease

What Happened: A law firm didn’t provide the landlord with timely notice of intent to exercise its renewal option when the lease expired. But it continued to occupy the space and pay rent. After accepting this arrangement for over 10 years, the landlord agreed to sell the building to a third party. Claiming that the proposed sale violated its option to purchase under the lease, the law firm let the landlord know that it was exercising that option. The landlord claimed that the option was no longer valid because the law firm was now a holdover tenant. The law firm sued for “specific performance”—that is, a court order requiring the landlord to honor its purchase option. Both parties moved for summary judgment.

Ruling: The Texas court said yes to the landlord’s motion and no to the law firm’s.

Reasoning: An option to purchase property doesn’t ripen into an enforceable contract of sale unless and until the holder “manifests its acceptance” of the option. The law firm didn’t do that until after the lease expired and it became a holdover tenant. While acknowledging its holdover status, the law firm argued that it was a “tenant-at-will” possessing the property with the landlord’s consent under a tenancy subject to the terms of the original lease, including the option to purchase. But the court disagreed, noting that, absent express language to the contrary, a tenant’s unexercised lease purchase option expires when the tenant fails to renew and becomes a holdover. And since the lease didn’t say anything about the option’s survival after lease expiration, the purchase option in this case was no longer valid.   

• Healy L. Offs., P.C. v. Troutmen, 2025 Tex. App. LEXIS 9896, 2025 LX 504416, 2025 WL 3724365