Smyth v. Berman
Facts: A commercial landlord enters into a lease agreement with a tenant, granting the tenant a right-of-first refusal to purchase the property if the landlord later decides to sell. The lease expires and the tenant continues to occupy the property as a holdover tenant on a month-to-month basis. The landlord agrees to sell the property to a new owner.
Claim: The tenant seeks money losses, claiming the landlord violated the terms of the original lease agreement since they did not offer the tenant the right-of-first refusal prior to selling it.
Counterclaim: The landlord claims they did not violate the lease agreement since the right of first refusal does not presumptively carry over to the holdover tenant’s month-to-month.
Holding: A California court of appeals holds the landlord may proceed with the sale to a new owner since the tenant’s right of first refusal does not presumptively carry over into a holdover tenancy. [Smyth v. Berman (January 10, 2019)_CA6th_]
Editor’s note — Only “essential” lease terms presumptively carry over into a holdover tenancy, such as the amount and terms of rent payment. See RPI Form 579 and Landlords, Tenants and Property Management Chapter 5: Options and the right of first refusal to buy.