## Facts

- Walgreen Properties owned commercial property at 7100 Lomas Boulevard NE in Albuquerque, New Mexico, and leased it through related entities for a long-term term with multiple renewal options.
- The lease required the tenant to provide written notice of intent to renew at least three months before the end of the current term.
- The leasehold interest was assigned over time and ultimately acquired by United Properties Limited Company (UPL) in 1994 for $700,000, with rent of $44,640 per year and additional renewal terms remaining.
- UPL invested approximately $1.2 million in improvements and subleased portions of the property to Casa Chevrolet, Inc. and Ford Leasing Development Co.
- To renew for the next term ending December 31, 2004, UPL was required to give written notice by September 30, 1999.
- UPL sent written notice on October 1, 1999—one day late—and Walgreen refused to recognize the renewal, asserting the option had expired.
- Before the then-current term ended, UPL sued for declaratory and injunctive relief seeking equitable enforcement of renewal despite its untimely notice; subtenants participated due to potential loss of their interests.
- The district court granted equitable relief and ordered the lease renewed; Walgreen appealed.

## Issues

1. Whether a commercial tenant’s late renewal notice, when the delay is attributable solely to the tenant’s negligence, effectively exercises a lease renewal option.
2. Whether equity may excuse noncompliance with a clear written notice condition in a commercial lease renewal option based on slight delay, minimal landlord prejudice, and substantial tenant hardship.

## Decision

- The Court of Appeals reversed the district court.
- The court held the October 1 notice did not effectively exercise the renewal option because timely written notice was an essential condition of the option.
- The court declined to grant equitable relief where the delay resulted from the tenant’s own negligence in an arm’s-length commercial transaction.
- Although the delay was slight and the tenant and subtenants faced serious hardship, the court concluded those considerations did not justify compelling renewal against the landlord’s contractual rights.

## Legal Principles

- An option to renew a lease must be exercised by strict compliance with the option’s stated conditions, including timely written notice.
- Equitable relief from a late renewal notice is limited and is not warranted merely because enforcement causes hardship when the lateness stems from the tenant’s negligence.
- In commercial leasing, courts prioritize certainty and enforce clear allocation of risk negotiated by sophisticated parties, rather than revising the bargain after a missed deadline.

## Conclusion

The court held that a one-day-late renewal notice, caused by the tenant’s negligence, did not exercise the renewal option and that equity would not compel renewal of a commercial lease where the notice condition was clear and strictly enforceable.


United Props. Ltd. Co. v. Walgreen Props., Inc., 134 N.M. 725, 82 P.3d 535 (N.M. Ct. App. 2003)