Especially in cases where a relationship has developed between the landlord and tenant over a number of years, landlords often make allowances when it comes to accepting late payment of rent. In a case recently decided by the Second Circuit Court of Appeal in the State of Louisiana, KM, Inc., v. Weil Cleaners, Inc., and All Occupants, the Court in its decision reminds landlords that a pattern of late rent forgiveness may put the landlord at risk of losing the ability to have a tenant evicted automatically for nonpayment of rent unless certain steps are taken to preserve that right.
In KM, Inc., v. Weil Cleaners, Inc., and All Occupants, Weil Cleaners, Inc. (Weil) had been leasing a unit in a commercial building from KM Inc. (KM) since January 24, 2001 and had paid over $180,000 in rent to KM by August 2014. After Weil failed to pay rent for the month of August, KM tacked a 5-day notice to vacate on Weil’s door. Though Weil sent KM a payment subsequent to its receipt of the notice, KM refused the payment and filed a rule for eviction against Weil on September 2, 2014. As would be revealed in court, Melody Olson, owner of KM, had accepted Weil’s monthly rent payments late six to eight times in 2014.
Donnie Weil, owner of Weil, testified at trial that the leased unit had been subject to frequent water infiltration over several years. Despite his latest requests for a solution to the problem involving the installation of an awning to cover the front door and windows, KM failed to act.
Ms. Olson testified that Mr. Weil informed her on August 22, 2014 that he was withholding August’s rent in an attempt to “leverage” her into installing the awning.
The Trial Court’s Finding
Even though the lease agreement contains language that purports to preserve both the lessor and lessee’s ability to enforce the terms of the lease despite a past waiver of a breach of the lease, in this case Weil not paying rent on time, the trial court found that KM’s act of accepting late payments from Weil for several months in 2014 waived KM’s right to evict Weil without first giving advance, unequivocal notice that late payments would not be accepted in the future. KM appealed the trial court’s decision.
In its analysis, the Court of Appeal noted that withholding rent is not an option available to a lessee (in this case the tenant Weil) under Louisiana law in the event that a lessor (in this case KM) fails to maintain the leased premises in a condition fit for its intended use and to make necessary repairs. The two options that are available to the tenant are to sue for dissolution of the lease agreement and resulting damages or to make the necessary repairs and deduct the reasonable cost of the repairs from the rent due.
However, the Court was persuaded by the fact that Ms. Olson had accepted Weil’s monthly rent payments late six to eight times in 2014 and found that “where a lessor customarily accepts these late rental payments, such custom has the effect of altering the original contract.”
Because KM failed to inform Weil that it would strictly enforce the lease provision regarding timely payment of rent beginning in August, the Court held that KM waived its right to evict Weil for late payments and affirmed the trial court’s decision. In the words of the Court, “it is inequitable to allow a lessor to mislead or lull a tenant into a false sense of security by accepting late rent payments for an extended period, without a demand for punctuality, and then on a future date of his own choosing, cancel the lease for nonpayment of rent.”
The lesson to landlords is clear: if in the course of a lease term a pattern of accepting late payment of rent is established, the landlord should provide clear written notice to the tenant that late payment of rent will no longer be acceptable should the landlord wish to preserve its right to cancel the lease and evict the tenant for nonpayment of rent.