Leases

 

Perpetual Leases Are Valid. California’s Uniform Statutory Rule Against Perpetuities (Prob. Code, §§21200 et seq.) does not apply to commercial non-donative transactions, such as leases, options to renew, rights of first refusal, or leases to commence in the future. As a result, a perpetual option to renew a commercial lease is enforceable where neither party to the lease intended to make a gift when entering into the lease and where the lease was not essentially gratuitous in character. The only limitation on a perpetual option to renew contained in a commercial lease is that found in Civil Code section 718, which limits a lease of a town or city lot to a term not to exceed 99 years. Here, the court held that the perpetual renewal provision in the lease before it was valid but had to be limited so that the entire term of the lease, including renewal periods, would not exceed 99 years. (Shaver v. Clanton (1994) 26 Cal.App.4th 568.)


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