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This Week in the Advance Sheets: Options to Purchase

Posted by Joseph Rockne | Oct 28, 2020 | 0 Comments

Division I issued an unpublished opinion (LM 15 LLC v. Girmay) concerning a dispute over an option to purchase real property.

The Buyers singed an option to purchase land occupied by an unbranded gas station and related buildings, the same day they signed a lease.

The agreements were entered into in 2015. The option expired in 2020. After taking possession, but before exercising the option, the lessee/buyer invested $550,000 renovating the property.

The Buyers went to excise their option. The Seller did not immediately respond; he was concerned about locating another property in order to execute a 1031 exchange. At the suggestion of the lessor/seller, the lessee/buyer sublet a portion of the property.

The seller/lessor, although he had encouraged and was aware of the sublease, terminated the lease and option asserting that the sublease violated the terms of the agreement. Lessee/buyer, of course, sued to enforce the option.

The Seller argued that the option lacked consideration and, therefore, was unenforceable.

The Trial Court (and the Appellate Court) found that the option to purchase and lease were part of the same transaction and, therefore, there was sufficient consideration to enforce the contract.

The trial court looked at the intention of the parties and found that they lease and option were intertwined and neither would have existed without the other. Factually, the trial court found that "there was substantial evidence to support the finding that the members of LM15 always intended to exercise the option and that the else and the option to purchase .... were part of the same transaction."

The Seller had relied on a case (Ledaura, LLC v. Gould) to support its contention that a lease is insufficient consideration to support an option to purchase. But the transaction in Ledaura was not a single transaction. The lease had come first and neither document mentioned the other.

There is addition discussion in the case concerning the Seller's allegations that the Buyers had materially breached the lease as well as some discourse on "equitable discretion to prevent forfeiture."

The Lessee/Buyers also recovered their attorney's fees as the prevailing party.

Now here I riff a bit. COME ON, the Seller/Lessor stood by while the Buyer/Lessees invested over half a million dollars renovating an rundown unbranded gas station, induced them to sublease a portion of the property remained silent when they went to exercise their option and then tried to deny them the right to purchase?

About the Author

Joseph Rockne

Joseph Rockne is a litigation and trial lawyer who represents businesses, families and individuals in state court. Joe has handled bench and jury trials in several Washington counties and has argued cases before the Washington Court of Appeals. He also represents clients in private arbitration an...

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