Arizona Court of Appeals Division One holds that a real-estate purchase option that lacks material terms related to the mechanics of sale may not be enforced through specific performance.

A tenant entered into a lease containing language stating that the tenant could purchase the leased home at the conclusion of the lease at its appraised value.  The tenant informed the landlord that he wished to purchase the home at a value for which he had obtained an appraisal.  The landlord rejected the offer and notified the tenant that it would not renew the lease.  The tenant sued the landlord for breach of contract seeking specific performance.  The trial court concluded that the tenant was entitled to specific performance of sale of the land at the appraised value.

The landlord appealed, arguing that the lease did not contain sufficiently definite terms to create a valid option to purchase the land.  The Court of Appeals agreed and reversed.  The Court acknowledged that an option need not be complete “in every detail,” but must have clearly defined terms.  In this case, the lease lacked detail regarding the timing of payment, terms of payment, condition of title, method of conveyance, escrow, and resolution of disputes over appraisal.  The Court also noted many of these missing terms were defined by the trial court at an evidentiary hearing after concluding specific performance was warranted.  On remand, the tenant will be restricted to other remedies for the landlord’s purported breach of the lease.

Judge Brown authored the opinion; Judges Johnsen and Campbell concurred.