Specific Performance Ordered Regarding Lessee's Purchase Option.
Last week we highlighted the specific performance judgment granted to the owners of a local country-western bar involving a contractual right of first refusal. In that case, the owners of the bar successfully brought suit against their lessor when the lessor attempted to sell the property to a third party without recognizing the first refusal clause in the lease agreement.
The Court of Appeals has just affirmed another similar verdict – this time involving a purchase option on a lot occupied by a car dealership. The owners of the dealership entered into a lease agreement for the property which contained a clause that allowed the owners the option of purchasing the property at the conclusion of 5 years. The owners gave notice that they intended to purchase the property and alertered the lessor of the date they intended to close. The lessor did not agree with the closing date or the valuation placed the property and refused to close. The owners filed suit and were awarded specific performance but the trial court but, on appeal, the Court reversed the summary judgment and held, among other things, that the lessor had the right to a “reasonable time” in which to close.
On remand, the parties dispute continued over the valuation of the property. At trial, the Court chose a “reasonable” closing date and set a valuation on the property using an average of the appraisals obtaining by the parties. The Court found that the Plaintiffs did not commit anticipatory breach of the lease agreement by attempting to force an earlier closing date and, accordingly, ordered specific performance regarding the purchase option held by the owners of the car dealership. This time the judgment was affirmed on appeal.
As these recent decisions continue to make clear, contractual provisions regarding the right to alienate real property (such as purchase options, rights of first refusal, etc…) will be enforced by Tennessee Courts by way of specific performance.
The case is Harper-Wittbrodt Automotive Group, LLC v. Teague, et al.