Can lessees avoid rent after exercising purchase options under Utah law? JMManufacturing v. PWE Explained

In JMManufacturing v. PWE, the Utah Court of Appeals addressed whether a tenant must continue paying rent after exercising a purchase option and before closing on the property. The case provides important guidance on how Utah courts interpret lease provisions that modify the traditional buyer in possession doctrine.

Background and Facts

J-M Manufacturing leased four properties from PWE under a 20-year lease that included a purchase option. When J-M exercised the option in April 2021, the parties disagreed on the fair market value calculation. After appraisers determined a purchase price of $53.5 million, J-M refused to close and stopped paying rent in December 2021. PWE sought specific performance and damages for unpaid rent. The district court granted summary judgment for PWE on both issues, but J-M appealed the rent and attorney fee rulings.

Key Legal Issues

The court analyzed two primary issues: (1) whether J-M owed rent after exercising its purchase option under the lease’s specific provisions, and (2) whether PWE was entitled to attorney fees under the lease’s litigation expense provision or default remedies clause.

Court’s Analysis and Holding

The court applied the buyer in possession doctrine, which generally terminates a lessee’s rent obligations upon exercising a purchase option. However, the court emphasized that parties can contract around this doctrine. Here, Paragraph 20(c) of the lease specifically provided that if closing was delayed more than 180 days, “Rent shall continue to be due and payable until completion of such purchase.” The court interpreted this as creating a 180-day suspension period followed by resumed rent obligations—rejecting J-M’s argument that this would create a double recovery. Regarding attorney fees, the court found the lease ambiguous because it contained both a general litigation expense provision and specific default remedies, requiring remand for further factual development.

Practice Implications

This decision demonstrates Utah’s willingness to enforce contractual modifications to common law doctrines when the language is clear. Practitioners should carefully draft lease purchase provisions to specify exactly when rent obligations suspend and resume. The attorney fee ruling underscores the importance of avoiding conflicting provisions in contracts—specific clauses should harmonize with general terms to prevent ambiguity that could necessitate costly litigation and factual development at trial.