The Laundry Room Lease Is Automatically Renewable Until When?

      So  a  new apartment building owner is told by the  laundry
room  operator that the operator is not going anywhere until  the
year 2010.  When?

      Many  laundry room leases, after initially providing for  a
five  year term, will, a few paragraphs later, provide  that  the
lease  may  be extended for two successive periods of five  years
each.   The  lease  will likely state that the  options  will  be
exercised  "automatically" unless the lessee provides notice  not
to  extend.   The  lease may also provide  that  the  lessor  may
terminate the lease only by written notice provided 90 days prior
to  the  end of the "second extended term."  In other words,  the
owner of the apartment building may not be able to terminate  the
lease  by notice before the lapse of approximately 15 years under
the lease!

      In  the area of residential real property, California Civil
Code §1945.5 provides in part that:

                "the automatic renewal or extension  of
          the  lease for all or a part of the full term
          of   the  lease  if  the  lessee  remains  in
          possession after the expiration of the  lease
          or  fails to give notice of his intent not to
          renew or extend before the expiration of  the
          lease shall be voidable by the party who  did
          not prepare the lease unless such renewal  or
          extension  provision appears in at  least  8-
          point  boldfaced  type, if  the  contract  is
          printed,  in the body of the lease  agreement
          and  the  recital  of the fact  that  such  a
          provision  is contained in the  body  of  the
          agreement   appears  in  at   least   8-point
          boldfaced  type, if the contract is  printed,
          immediately  prior  to the  place  where  the
          lessee executes the agreement, any waiver  of
          the  provisions of this Section  is  void  as
          against public policy."

       Although   an   apartment  building   generally   involves
residential  real  property,  a laundry  room  filled  with  coin
operated washers and dryers would seem to constitute a commercial
enterprise,  and thus exempt from such Code Section.   I  do  not
believe  a  written  judicial  opinion  determining  whether  the
requirements of Civil Code §1945.5 apply to a laundry room  lease
has  been issued by the courts.  It is, however, probably only  a
matter  of  time before a heated legal battle between a  building
owner  and  a  laundry  room operator  results  in  an  appellate
decision that will settle this issue.
      There  was  a time when little attention was  paid  to  the
content of a laundry room lease.  Apartment building owners  are,
however,   becoming  increasingly  aware  of  the   content   and
consequences  of a long term laundry room lease.   As  a  result,
building  owners  are consulting with attorneys  more  frequently
regarding these matters.

      Counsel  for  apartment building owners are advising  their
clients  to  consider the following issues in  their  discussions
with laundry room operators:

     1.        Limit the lease term to one, two or three years.

     2.        Delete any automatic renewal clause, so that only a
month-to-month  tenancy will exist after the  expiration  of  the
initial term.

     3.        Specify the quality of the equipment to be installed,
e.g., new or used equipment, and perhaps brand of equipment.

     4.        If the lease provides that following termination, the
lessee  nonetheless has the right of first refusal  to  meet  any
bona  fide  offer  to  lease the premises  submitted  by  another
company,  on the same terms as the other company's offer,  insist
that the provision be deleted.

     5.        Review the nature of any public liability insurance
required under the lease.

     6.        Do not permit the laundry room lease to be recorded.
If a dispute arises between a building owner and the laundry room
operator,  a recorded lease will serve as a cloud upon title  and
make  more  difficult the building owner's  effort  to  limit  or
remove the effect of the lease.

      As  a laundry room operator, how would you respond to these
concerns of an apartment building owner?  Before you contact that
next big, potential apartment building customer, you may wish  to
reflect  upon  these questions with your own  legal  advisor.   A
hesitant,  ambiguous response to a question considered  important
to the building owner may lose the customer!

[This column is intended to provide general information only  and
is  not intended to provide specific legal advice; if you have  a
specific  question  regarding the  law,  you  should  contact  an
attorney  of your choice.  Suggestions for topics to be discussed
in this column are welcome.]


Reprinted from New Era Magazine
Myles M. Mattenson © 1996-2002