Opinion
No. 77-017
Decided October 20, 1977.
In action for specific performance of option to purchase real estate, trial court dismissed action and plaintiff appealed.
Affirmed
1. VENDOR AND PURCHASER — Option — Time of the Essence — Strict Compliance Required — Failure to Comply — Specific Performance — Damages — Barred. In option contracts, time is of the essence even though not expressly stated; strict compliance with the terms of the option is required; and failure to comply with the option provision deprives the optionee of a right to specific performance or damages.
2. LANDLORD AND TENANT — Lease Terms — Option to Buy — Terminated — End of Lease Period — Lessee in Possession — Holdover Provision — Option Expired. By the terms of the lease at issue an option to buy the leased property terminated at the end of the original lease term, and accordingly, even though lessee remained in possession of the premises after the end of the lease term under a holdover provision contained therein, the option to buy expired at the end of the lease period, and could not be exercised thereafter.
Appeal from the District Court of Adams County, Honorable Jean J. Jacobucci, Judge.
Mason, Reuler Peek, P.C., William M. Peek, Rosanne M. Hall, for plaintiff-appellant.
Grant, McHendrie, Haines Crouse, P.C., John Burrus, Ronald C. Butz, for defendants-appellees.
Plaintiff, Rubber, Incorporated, appeals from a judgment dismissing its claims against defendants, Lum Jenkins and Lyle Carpenter, for specific performance of an option to purchase real estate, or for damages for defendants' failure to convey the property. We affirm.
The case was submitted on an agreed statement of facts, which, as pertinent to this appeal, are: Defendants, as joint venturers, and plaintiff executed a lease for premises to be used by plaintiff as an office and warehouse. The term of the lease was for five years, beginning on February 15, 1971, and ending on February 15, 1976. The provisions of the agreement included an option to purchase the premises, which stated that:
"The Lessee shall have the right to purchase the property . . . at the end of three years for the purchase price of $100,000 . . . . In the event the Lessee does not exercise its option to purchase at the end of three years, they may purchase the property on a contract for deed basis at the end of five years . . . ."
At the termination of the lease, plaintiff remained in possession pursuant to a holdover provision in the lease. It did not exercise the option on, or prior to, February 15, 1976. However, on February 23, 1976, a representative of the plaintiff met with defendant Carpenter and discussed the possibility of plaintiff's desire to exercise the option. During the first week of March 1976, plaintiff advised defendants that it did in fact wish to purchase the property.
Defendants refused to sell the property for the $100,000 figure, and plaintiff refused to pay more, and commenced this action. The parties filed motions for summary judgment. Plaintiff's motion was denied and defendants' motion was granted.
The primary issue before the trial court and here is whether the option terminated on February 15, 1976, and had to be exercised on or before that date, or whether it could be exercised within a reasonable time thereafter. We hold that the option was not timely exercised.
[1] In option contracts, time is of the essence even though not expressly stated, McKenzie v. Murphy, 31 Colo. 274, 72 P. 1075 (1903), and strict compliance with the terms of the option is required. Rosenthal v. Sandusky, 35 Colo. App. 220, 533 P.2d 523 (1975). Failure to comply with the option provisions deprives the optionee of a right to specific performance or damages. Miller v. Carmody, 152 Colo. 353, 384 P.2d 77 (1975).
[2] Here the right to exercise the option terminated with the end of the original five year term of the lease, and not having been exercised at that time, the option expired. As was stated in McKenzie, supra, if a reasonable time rule were to be adopted, title to the subject property would remain unmarketable for an indefinite period during which the optionee could unilaterally speculate upon the value of the property. We therefore adhere to the rule of strict compliance.
The option having expired by its terms at the end of five years, there is no merit in plaintiff's argument that the holdover period which was "subject to all the terms and provisions" of the lease extended the option.
Judgment affirmed.
JUDGE COYTE and JUDGE BERMAN concur.