## Facts

- A commercial lease began January 1, 1964 for a 10-year term and included an option to renew if the tenant gave written notice by registered or certified mail at least six months before the term ended.
- The lease was assigned to a corporation operating a restaurant on the premises.
- In 1968, the landlord modified the renewal option to permit a 24-year renewal period, while leaving all other renewal-option requirements, including the six-month notice condition, unchanged.
- The tenant (an assignee) purchased the restaurant business, took possession, and made substantial improvements to the premises.
- The tenant failed to provide renewal notice by the six-month deadline due to negligence or inadvertence (mere forgetfulness), not strategic delay.
- After the deadline passed, the landlord notified the tenant that the option had expired and that the tenant would have to vacate at the end of the term; the tenant then sent a late notice purporting to renew, which the landlord rejected.
- The tenant faced loss of its investment in improvements and the goodwill tied to the restaurant’s location if forced to leave.

## Issues

1. Whether a tenant who negligently fails to give timely notice to exercise a lease renewal option may obtain equitable relief permitting late exercise when denial would cause a substantial forfeiture.
2. Whether such relief is conditioned on the landlord’s lack of prejudice from the late notice.

## Decision

- The Court of Appeals reversed the Appellate Division’s order granting possession to the landlord.
- The court held that equitable relief may be available despite negligent late notice if denial would cause a substantial forfeiture and the landlord was not prejudiced by the delay.
- The case was remanded for a new trial to determine whether the landlord suffered prejudice as a result of the late notice.
- The court did not order renewal outright; it permitted the possibility of late exercise based on findings on forfeiture and prejudice.

## Legal Principles

- Option provisions are generally enforced strictly; when “time is of the essence,” an option not exercised within the stated time is ordinarily ineffective.
- Equity may relieve a tenant from the consequences of late notice of renewal where:
  - the tenant is in possession,
  - denial would result in a substantial forfeiture (including loss of significant improvements or business goodwill), and
  - the landlord is not prejudiced by the delay.
- Negligence or inadvertence in missing the deadline does not categorically bar equitable relief; the court may consider whether the late notice was an honest mistake rather than strategic conduct.
- Prejudice to the landlord is a limiting condition; relevant considerations include whether the landlord relied on expiration to make binding commitments or re-let the premises.

## Conclusion

The court held that a tenant’s negligent failure to give timely renewal notice can be excused in equity when strict enforcement would cause substantial forfeiture and the landlord was not prejudiced, and it remanded for fact-finding on prejudice before determining whether late renewal should be allowed.


J.N.A. Realty Corp. v. Cross Bay Chelsea, Inc., 42 N.Y.2d 392, 366 N.E.2d 1313 (N.Y. 1977)