Utah Court of Appeals
Can a tenant avoid rent after exercising a purchase option? J-M Manufacturing v. PWE Explained
Summary
J-M Manufacturing exercised its option to purchase properties from PWE but disputed the purchase price and stopped paying rent in December 2021. The district court granted summary judgment for PWE on both ongoing rent obligations and attorney fees. The Court of Appeals affirmed the rent award but limited it to exclude a contractual 180-day suspension period, and reversed the attorney fees award due to lease ambiguity.
Practice Areas & Topics
Analysis
The Utah Court of Appeals addressed an important question about rent obligations when a tenant exercises a purchase option in J-M Manufacturing v. PWE. The case involved a 20-year lease where the tenant exercised its option to buy the properties but disputes arose over both the purchase price and ongoing rent payments.
Background and facts: J-M Manufacturing leased four properties from PWE under a 20-year lease containing a purchase option. When J-M exercised the option in April 2021, the parties disagreed about the purchase price calculation. J-M stopped paying rent in December 2021, arguing it had become a “buyer in possession” with no further rent obligations. The appraisers eventually agreed on a $53.5 million purchase price, but closing was delayed until November 2023 due to litigation.
Key legal issues: The court addressed two primary questions: (1) whether J-M remained obligated to pay rent after exercising its purchase option, and (2) which lease provision governed PWE’s attorney fees claim. The case required interpretation of the buyer-in-possession doctrine and specific lease language about rent continuation.
Court’s analysis and holding: The court held that while the buyer-in-possession doctrine normally terminates rent obligations when a purchase option is exercised, parties can contract around this rule. Here, Paragraph 20(c) of the lease specifically provided that rent would “continue” if closing was delayed more than 180 days after the scheduled purchase date. However, the court found J-M was entitled to a 180-day suspension period before rent obligations resumed. On attorney fees, the court found the lease ambiguous between competing provisions and reversed for further proceedings.
Practice implications: This decision demonstrates the importance of precise drafting in commercial leases with purchase options. Practitioners should clearly specify rent obligations during transition periods and avoid ambiguous attorney fees provisions. The case also shows courts will enforce express contractual modifications to common law doctrines like buyer-in-possession when the language is sufficiently clear.
Case Details
Case Name
J-M Manufacturing v. PWE
Citation
2026 UT App 23
Court
Utah Court of Appeals
Case Number
No. 20230908-CA
Date Decided
February 12, 2026
Outcome
Affirmed in part and Reversed in part
Holding
A tenant’s rent obligations under a lease with a purchase option are suspended for 180 days after the scheduled purchase date but continue thereafter until closing if the purchase is delayed beyond that period.
Standard of Review
Correctness for summary judgment and contract interpretation questions
Practice Tip
When drafting lease purchase options, include clear language about rent obligations during any transition period to avoid disputes about the buyer-in-possession doctrine.
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