The Law

Leases Trumps Late Pays by Ron Davis The no-nonsense wording of the lease between an Indiana shopping center and one of its tenants has resolved a dispute between the two parties over rental responsibility. The shopping center is Marwood Plaza in Marion, and the dispute resulted from certain lease violations by the tenant. That lease required, among other demands, rental payments no later than the first day of each month. Plus, it made the tenant personally liable for those rental payments. Just as important, the lease stated that despite any relaxing of the conditions of the lease by the center’s owners, the tenant still must comply with the lease requirements. That last provision was tested when the tenant consistently failed to pay rent on time and the center’s owners nevertheless accepted the late payments. The tenant apparently understood that laxity as a sign that the lease was flexible and compromising. That thinking was tested when new owners began operating Marwood Plaza. Those owners required a strict honoring of the terms of all leases they inherited. So when the tenant continued to make late rental payments, the owners finally evicted him and demanded personal payment of all back rent and penalties. The tenant replied that the new owners had in fact accepted some late rental payments and by doing so had waived their right to claim a lease default on his part. In response, the new owners pointed to the terms of the tenant’s lease. It stated, in part, that “the acceptance of rent by the landlord shall not be deemed a waiver of any earlier breach [of the lease] by the tenant.” Furthermore, the guaranty stated that the tenant’s liability as guarantor “shall in no way be affected, modified or diminished...by reason of any dealings or transactions or matter or thing occurring between landlord and tenant, its successors or assigns.” An Indiana appellate court, in ruling in favor of the center’s owner, explained, “Under the clear language of the lease, the new owners did not waive the tenant’s default by accepting the late payments. Further, the guaranty of the tenant was not affected by the owners’ failure to assert its rights against the tenant. We conclude that the tenant was in default because he failed to make timely rent payments. Consequently, the owners did not waive their right to enforce the guaranty.” (HK New Plan Marwood Sunshine Cheyenne v. Onofrey Food Services, 2006 WL 1098590) Decision: April 2006 Published: May 2006