Once again the security system is giving me fits. This didn't post, so far as I can tell, so I'm adding this line to permit me to post again.

Daily Development forTuesday, March 23, 2004
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu

LANDLORD/TENANT; EXTENSION AND RENEWAL; “REASONABLE RENT:” An option to renew stating that the renewal rent shall be the “market rent is not, at least as a matter of law, unenforceable for vagueness.

Miner v. Tustin Ave. Investors,10 Cal Rptr. 3d 178 (Cal. App. 2004)

The option to extend the Lease provided that rent for the option period "shall be adjusted to the greater of market rent, or the rent adjustment of 3% over the rent currently being paid by Lessee at the time of exercise of option." The tenant argued that the term "market rent" is too vague to be enforceable. Instead, he sought to exercise his option, but to limit the rent increase to 3 percent.

The court agreed that some option provisions are so uncertain as to amount to nothing more than an agreement to agree. An example would be a lease option providing for rent to be determined by mutual agreement of the parties at the time of exercise of the option. The standard is whether the court the lease agreement contains an "ascertainable standard" for the determination of rent.

But option agreements may be enforceable even where they do not specify the exact amount of future rents, so long as there is an ascertainable standard for the determination of rent. In such situations, courts "are not making a new contract for the parties but merely compelling the parties to do what they contemplated at the time they initially contracted."

In the instant case, the court held that it was premature to decide issues regarding the "market rent" provision without the benefit of a trial court record. The case had been resolved on a different issue which the court now was reversing, giving rise to the question of adequacy of the renewal clause.

Also see: Lloyd Noland Foundation v. City of Fairfield, 837 So. 2d 253 (Ala. 2002) (the DIRT DD for 6/03/03) (Option to lease 120 hospital beds in which "the location of the Premises and the amount of rent" shall be subject to renegotiation at the option of either party" is not void as an "agreement to agree" but rather imposes on the Landlord an obligation to negotiate in good faith.)..

For a real “hardball” reading of a “market rent setting provision, see Wallace v. 600 Partners Co., 634 N.Y.S.2d 669 (Ct. App. 1995) (The DIRT DD for 6/19/96)(Renewal provision in long term ground lease providing that rent is to be fixed pursuant to an appraisal at a percentage of the "then value" of the land, where a party desiring the appraisal is to give notice no earlier than "twelve months prior to the "expiration of any such . . . term," requires the determination of the rent for the term to take place a year before the expiration of the renewal term, even if this defers determination of the rental amount until 32 years after lease term commences.)

Comment: Note that an agreement to set the renewal rent at market rent is quite different from an agreement to set the renewal rent at a “reasonable” rent. The editor has taken the position in the past that such a renewal term is illusory, but others have argued that it should be interpreted to mean “market.” For a case apparently accepting this analysis, See e.g.Carlson v. Bold Petroleum, Inc., 996 P.2d 751 (Colo. App. 2000), the DIRT DD for 3/12/01)

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.

Parties posting messages to DIRT are posting to a source that is readily accessible by members of the general public, and should take that fact into account in evaluating confidentiality issues.


DIRT is an internet discussion group for serious real estate professionals. Message volume varies, but commonly runs 5 15 messages per work day.
Daily Developments are posted every work day. To subscribe, send the message

subscribe Dirt [your name]



To cancel your subscription, send the message signoff DIRT to the address:


for information on other commands, send the message Help to the listserv address.

DIRT has an alternate, more extensive coverage that includes not only commercial and general real estate matters but also focuses specifically upon residential real estate matters. Because real estate brokers generally find this service more valuable, it is named “BrokerDIRT.” But residential specialist attorneys, title insurers, lenders and others interested in the residential market will want to subscribe to this alternative list. If you subscribe to BrokerDIRT, it is not necessary also to subscribe to DIRT, as BrokerDIRT carries all DIRT traffic in addition to the residential discussions.

To subscribe to BrokerDIRT, send the message

subscribe BrokerDIRT [your name]



To cancel your subscription to BrokerDIRT, send the message signoff BrokerDIRT to the address:


DIRT is a service of the American Bar Association Section on Real Property, Probate & Trust Law and the University of Missouri, Kansas City, School of Law. Daily Developments are copyrighted by Patrick A. Randolph, Jr., Professor of Law, UMKC School of Law, but Professor Randolph grants permission for copying or distribution of Daily Developments for educational purposes, including professional continuing education, provided that no charge is imposed for such distribution and that appropriate credit is given to Professor Randolph, DIRT, and its sponsors.

DIRT has a WebPage at:


To be removed from this mailing list, send an email message to listserv@listserv.umkc.edu with the text SIGNOFF BROKERDIRT.

Please email manager@listserv.umkc.edu if you run into any problems.
See <http://www.umkc.edu/is/cs/listserv/unsubscribing.htm> for more information.