## Facts

- Owners leased commercial property in Charlotte, North Carolina to 60 Minute Systems, Inc. for a 15-year term with two 5-year renewal options requiring timely written notice.
- 60 Minute Systems executed a written “sublease” to Hutchison for a 5-year term with renewal options and reserved a reversionary interest and a right of re-entry.
- After 60 Minute Systems entered bankruptcy, Neal acquired Hutchison’s interest by assignment, took possession, and paid rent directly to the owners (and their successor) for about 12 years.
- Neal claimed he timely gave the landlord written notice to extend his tenancy and made substantial improvements in reliance on continued occupancy.
- The landlord denied receiving written renewal notice and treated any continued occupancy and rent increases as a month-to-month arrangement.
- The landlord later notified Neal to vacate; Neal refused, asserting the “sublease” was legally an assignment and that the landlord was estopped by accepting rent and allowing improvements.

## Issues

1. Whether the 1967 instrument was an assignment of the prime lease or a sublease.
2. Whether a sublessee (or assignee of a sublease) may exercise renewal options in the prime lease when the prime lessee did not exercise them.
3. Whether the landlord’s acceptance of rent and knowledge of improvements created equitable estoppel preventing denial of Neal’s claimed renewal rights.
4. Whether summary judgment was proper given the evidentiary disputes.

## Decision

- The court affirmed summary judgment for the landlord.
- The 1967 instrument was a sublease, not an assignment, because it reserved a reversionary interest and right of re-entry in the transferor.
- As a sublessee, Neal lacked privity to enforce the prime lease’s renewal options, particularly because the prime lessee never exercised them.
- Equitable estoppel did not apply because the record lacked evidence of misrepresentation or inducement by the landlord.
- Any dispute about whether Neal sent written notice was immaterial to the controlling legal issues.

## Legal Principles

- A transfer that reserves a reversionary interest or right of re-entry in the transferor is generally a sublease, not an assignment.
- A sublessee’s rights are limited by the sublease and the prime lease; absent an assignment of the entire estate or exercise of renewal by the prime lessee, a sublessee cannot renew the prime lease.
- Equitable estoppel requires misleading conduct (e.g., representation, concealment, or inducement) and detrimental reliance; acceptance of rent and awareness of improvements alone is insufficient.
- Summary judgment is appropriate when there is no genuine issue of material fact, and factual disputes that do not affect the legal outcome do not bar judgment as a matter of law.

## Conclusion

The court held that Neal remained a sublessee without authority to extend the prime lease’s term and failed to show landlord conduct supporting estoppel; therefore, the landlord was entitled to summary judgment.


Neal v. Craig Brown, Inc., 356 S.E.2d 912 (N.C. Ct. App. 1987)