Under what circumstance is a lessee bound to renew the lease?

A lessee is bound to renew the lease when the lease agreement specifies a renewal condition. Lease agreements often contain specific clauses that outline the terms and conditions under which a renewal must occur. This may include stipulations about timeframes for renewal notices, rental rates upon renewal, and any conditions the lessee must meet in order to exercise the renewal option. These contractual obligations create a binding duty for the lessee if the conditions are appropriately set forth in the lease document.

In other scenarios, such as short lease terms, financial requirements, or prior investments in the asset, there is no automatic obligation to renew unless explicitly stated in the lease agreement. Therefore, the presence of a clear renewal provision in the contract plays a crucial role in determining whether the lessee is obliged to renew the lease.