## Facts

- A commercial lease for retail space in Manhattan ran from November 7, 1994 through January 31, 2011, and granted the tenant two five-year renewal options.
- The first renewal option required written notice no later than January 31, 2010, served in the manner specified in the lease.
- The tenant intended to renew but missed the deadline due to a clerical calendaring mistake by its controller.
- On February 4, 2010, the tenant sent an emailed/faxed renewal letter that was incorrectly dated January 30, 2010.
- On February 5, 2010, the landlord rejected the renewal as late, not in the contractually required form, and asserted the tenant had backdated the letter.
- On February 9, 2010, the tenant served a renewal notice in the precise manner required by the lease.
- The landlord filed suit seeking a declaration that the option lapsed and the lease would expire January 31, 2011.
- After approximately 15 years at the location, the tenant showed it had developed substantial location-specific customer goodwill and that loss of the site would materially harm that business asset.
- The trial court found the delay was a good-faith mistake, the landlord suffered no prejudice from the short delay, and strict enforcement would cause a forfeiture.

## Issues

1. Whether equity may excuse a commercial tenant’s late exercise of a renewal option caused by an excusable, good-faith calendaring error.
2. Whether loss of location-specific business goodwill can constitute forfeiture sufficient to support equitable relief even where physical improvements to the premises are modest.
3. Whether the landlord must show prejudice from the delay to defeat equitable relief.

## Decision

- The Appellate Division, First Department affirmed the judgment for the tenant.
- The court held that equity excused the brief lateness and validated the tenant’s exercise of the renewal option.
- The court agreed that the tenant’s default was inadvertent and in good faith, the landlord showed no prejudice, and the tenant faced substantial forfeiture through loss of location goodwill.

## Legal Principles

- Although option provisions generally require strict compliance, courts may grant equitable relief from a tenant’s failure to timely exercise a renewal option to avoid forfeiture.
- Equitable relief is appropriate where (1) the tenant’s delay results from an excusable, good-faith default, (2) the tenant would otherwise suffer forfeiture, and (3) the landlord is not prejudiced by the delay.
- Forfeiture is not limited to loss of physical improvements; substantial, location-specific business goodwill and the value of a long-established retail presence may qualify as a protectable interest.
- A short delay with no showing that the landlord materially changed position (e.g., re-letting efforts or other concrete reliance) supports excusing late notice.

## Conclusion

The court enforced the renewal option in equity because the tenant’s brief, inadvertent delay caused no prejudice to the landlord, while strict enforcement would have resulted in substantial forfeiture through loss of long-standing, location-dependent business goodwill.


135 E. 57th St. LLC v. Daffy’s Inc., 88 A.D.3d 532, 934 N.Y.S.2d 112 (1st Dep’t 2011)