Leaseholds

The North Carolina Supreme Court has held that the implied warranty of habitability does not obligate landlords to inspect premises periodically to find problems. Terry v. Pub. Serv. Co., 898 S.E.2d 648 (N.C. 2024). Rental property was inspected a couple of times when the neighbor and the tenant smelled gas, but nothing was found and the tenant did not notify the landlord. Subsequently, the tenant was severely injured by an explosion caused by a corroding gas pipe. While the trial court found no violation of state statutes regulating residential rental property, the appeals court reversed. But the Supreme Court reversed the appeals court and held that the landlord has no duty of repair under the statute unless the tenant notifies the landlord of the problem first. This seems in line with the law in most states which do not impose liability on landlords for personal injury due to conditions in …

No landlord duty to inspect rental property periodically Read More »

The North Carolina Supreme Court held that a landlord cannot be held liable for negligence in failing to correct a dangerous condition if the tenant has not told the landlord about it so that the landlord had the chance to fix it before it caused harm. Terry v. Pub. Serv. Co. of N.C., Inc., 898 S.E.2d 648 (N.C. 2024).

The Ohio Supreme Court held that a tenant has a right to receive visitors. Landlords have no right to stop third parties from entering the leased premises at the invitation of a tenant. A visitor who has a tenant’s permission to enter has not committed a criminal trespass just because the landlord has sought to bar that person from the property. State v. Randolph, 2023 WL 9007535 (Ohio 2023). Oddly, however, the court seemed to suggest that the landlord might have the power it the landlord retained the power in the lease. This later point, however, was dicta and the court was not confronted with a landlord who doesn’t want tenants to have friends. Most courts would find such a covenant to violate public policy. The landlord has the right to exclude people for valid business reasons but has no power to determine who tenants invite into their homes.

The Supreme Judicial Court ruled that a landlord was entitled to five years of rent upon the tenant’s breach in accord with a rent acceleration clause in the lease, even though the landlord was able to quickly find a replacement tenant. Cummings Props., LLC v. Hines, 217 N.E>3d 604 (Mass. 2023). The court believed the amount of the liquidated damages was not an unreasonable estimate of the costs of breach, and that it did not matter how much the damages actually were, in other words, how quickly the landlord was able to relet the premises. The court found, unlike many other courts, that the remaining rent is per se a reasonable estimate of the damages from breaching the lease regardless of how easy it is to find a replacement tenant. Id. at 610.

When a tenant pays rent late habitually and the landlord does not object, courts will generally not allow eviction because the landlord’s actions have shown that the late payments are not material. It is as if the terms of the agreement were renegotiated. But what happens if the landlord does object and even imposing penalties, as allowed in the lease, for the late payments? Can longstanding late payments justify eviction then? One might think the answer is yes because the timing of rental payments is generally thought to be a material term of the rent agreement. But a Massachusetts courts refused to allow eviction of a commercial tenant (a restaurant) in these circumstances. Varano v. PDJM Land Trust, LLC, 230 N.E.3d 1060 (Mass. App. Ct. 2024). The court found that the rent payments were usually only a few days late, although sometimes as much as a few weeks. The court …

Late rent payments may not justify eviction Read More »

While it is settled now in almost all states that residential landlords have a duty to mitigate damages by attempting to relet the premises if the tenant leaves before the end of the lease term, courts are not in agreement about whether the same principle applies to commercial leases. When there is a duty to mitigate, it is generally nondisclaimable. Thus a liquidated damages clause that requires a defaulting tenant to immediately pay the rest of the rent due for the rest of the lease term will not be honored if it exceeds the amount of damages that would accrue if the landlord had made reasonable efforts to relet the premises. But Massachusetts courts do not apply this principle (either the duty to mitigate or the nonenforcement of liquidated damages clauses) in the context of commercial leases. See Cummings Props, LLC v. Hines, 217 N.E.3d 604 (Mass. 2023) (upholding a …

State courts disagree about whether commercial landlords have a duty to mitigate damages Read More »

Applying New York law, the Second Circuit held that a business tenant was not excused from paying rent because of business closure order from the Governor of New York to protect the public from exposure to Covid-19 at the height of the pandemic crisis. In re NTS W. USA Corp., 2022 U.S. App. LEXIS 28811, 2022 WL 10224963 (2d Cir. 2022). The court refused to apply the defensive doctrines of “frustration of purpose” or “impossibility.” The court found that the frustration of purpose doctrine applies only when a catastrophic event renders the lease valueless to one of the parties. Impossibility arises when the inability to perform comes from an unanticipated event. In this case, the express terms of the business lease stated that the tenant had a duty to pay rent even if a condition arose if that condition was not in the landlord’s control. The leas also required payment even if the …

Covid-19 closure order does not excuse tenant from paying rent Read More »