Amb Property LP v. MTS Inc.

The trial court erred in finding that the severability clause in a lease allowed a renewal clause to survive, despite the unenforceability of integral pricing language.

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This case concerns the construction of a lease’s renewal provisions. The renewal provisions set the new rental rate as the greater of i the base rent for the last year of the original term or ii the then existing market rental rate for comparable shopping centers. The trial court and all parties agree that under Georgia law, the market rental rate for comparable properties is unenforceably vague and indefinite, as it provides no mode by which a definite price may be ascertained.1 The question on appeal is whether, because of the lease’s severability clause, a court can excise the indefinite language and force the landlord to accept the base rent for the last year of the original term as the rent under the renewed lease. This turns on whether the last year’s base rent is a separate provision for calculating the renewal rental rate, or whether it is only one of two factors in a single provision for calculating that rate. We hold it is the latter and therefore reverse.

In 1989 MTS, Inc. leased certain space near Lenox Square in Atlanta from the predecessor-in-interest of the appellant/ landlords. The lease had a ten-year-and-five-month term expiring January 31, 2000, with a five-year renewal option. Shortly before the end of the original term, MTS exercised its renewal option, which was accepted by the landlords. The renewal provision stated that the new rent “shall be the greater of a base rent for the last year of the original term or b the then existing market rental rate for comparable Shopping Centers.” When the landlords stated that they had calculated the current market rental rate to be $29.50 per square foot and that this would be the renewal rental rate, MTS objected and proposed paying the base rent for the last year of the original term.

Amb Property LP v. MTS Inc.

The trial court erred in finding that the severability clause in a lease allowed a renewal clause to survive, despite the unenforceability of integral pricing language.

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