## Facts

- In 1971, tenants Robert and Helen Clanton entered into a commercial lease for shopping-center space with an initial 10-year term, minimum annual rent, a percentage-rent provision, and an option to renew for 10 years.
- The property was purchased shortly after by Emerson Stanley, who became the landlord; later dealings removed the percentage-rent component.
- In 1985, an amendment removed percentage rent and added options to renew for two additional five-year periods.
- In 1989, a further amendment granted tenants the right to extend the lease for successive five-year periods at the end of each prior period and included a right of first refusal if the property was offered for sale.
- After Stanley’s death, his heir, Donna Shaver (individually and as trustee), sued to invalidate the 1989 amendment, asserting the indefinite renewal options violated the rule against perpetuities.

## Issues

1. Whether California’s rule against perpetuities, as modified by the Uniform Statutory Rule Against Perpetuities, invalidates a commercial lease amendment granting indefinite renewal options and a right of first refusal.
2. Whether, regardless of the rule against perpetuities, California Civil Code § 718 limits the total duration of a lease of a town or city lot (including renewals) to 99 years.

## Decision

- The Court of Appeal held that the rule against perpetuities does not apply to this commercial, nondonative transaction, including the renewal options and right of first refusal.
- The court reversed the trial court’s ruling that had voided the indefinite renewal options under the rule against perpetuities.
- The court held that Civil Code § 718 caps the total term of the lease, including all renewals, at 99 years from the lease’s 1971 effective date.
- The renewal options remain enforceable as a series of five-year extensions, but only up to the statutory 99-year maximum.

## Legal Principles

- Under California’s Uniform Statutory Rule Against Perpetuities, commercial, nondonative transactions—such as commercial lease renewal options and rights of first refusal—are excluded from perpetuities invalidation.
- A statutory cap may independently limit the duration of an otherwise valid commercial lease arrangement.
- For leases of town or city lots, California Civil Code § 718 limits the aggregate lease term, including exercised renewal options, to 99 years measured from the lease’s commencement.

## Conclusion

The court upheld perpetual-style renewal options and a right of first refusal in a commercial lease as exempt from the rule against perpetuities, but enforced Civil Code § 718 by limiting the lease’s total duration, including renewals, to 99 years from the 1971 start date.


Shaver v. Clanton, 31 Cal. Rptr. 2d 595 (Cal. Ct. App. 1994)