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Want Out? Prove It: Enforcing Termination Options in Massachusetts Commercial Leases

By on May 22, 2017

A recent Massachusetts Appeals Court decision made clear that the burden of proof relative to the operation of lease option clauses falls on the party seeking to exercise the option regardless of which party moves to enforce their rights pursuant to the lease. In Patriot Power, LLC v. New Rounder, LLC, et al. (2016), a commercial landlord initiated an action for declaratory judgment and breach of contract against a tenant alleging that the tenant did not properly exercise its contract option to terminate its tenancy.

At trial, the jury was instructed that the landlord bore the burden of proof relative to the claim that the tenant had not properly exercised the lease termination option. The landlord objected to the instruction and subsequently lost the case. On appeal, the court sided with the landlord and reversed the ruling on the grounds that the jury instruction regarding the burden of proof was erroneous and prejudicial.

The court held that the fact that the landlord initiated the action for declaratory relief did not shift the burden to the landlord on the underlying action. The court cited a line of cases supporting the proposition that, “one relying on a condition to avoid contractual obligation has the burden to prove the occurrence of the condition.” A proposition made stronger when the facts are such that, “the contractual obligation actually requires an affirmative act by the party seeking to end the obligation.”

As applied to the facts in Patriot Power it is clear that the tenant bore the burden of proof. The lease termination option required the tenant to mail timely notice of such termination in order to relieve the tenant of further contractual obligation. Thus, the tenant needed to prove it had, in fact, complied with the terms of the lease rather than the landlord needing to prove non-compliance. Lease termination option clauses are common in many Massachusetts commercial leases. Both commercial landlords and tenants should read their leases carefully in order to fully understand the obligations and provisions contained within.

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