Owner's Bad Conduct Negates Tenant's Waiver

A lease included a waiver provision in which a tenant agreed not to get an injunction if the owner tried to terminate its lease. A dispute arose between the owner and the tenant when sewage overflowed into the tenant's space and hurt the tenant's business. The tenant stopped paying rent, and the owner threatened to terminate the lease. The tenant asked a court for, and got, an injunction to prevent the lease termination. The owner then sued to evict the tenant because the tenant's injunction had violated the lease's waiver provision.

A New York court dismissed the owner's lawsuit without a trial. The court ruled that the owner could not enforce the waiver provision against the tenant for three reasons. First, the owner had defaulted under the lease by not repairing the sewer pipe that caused the sewage overflow in the tenant's space. Second, because the owner “willfully” didn't repair the sewer pipe, the owner violated an implied duty to deal honestly and fairly with the tenant. Third, the lease's waiver provision operated as a penalty because it would result in the tenant's losing its entire investment in the space, while the owner “acted in complete disregard of its contractual obligations,” said the court.

• Malik v. Toss 29, Inc.: No. SP 135/07, 2007 N.Y. Misc. LEXIS 1207 (N.Y. Sup. Ct. 3/29/07).

Sidebar

Lesson Learned: Even if your lease requires a tenant to waive an important right, the waiver may not be enforceable if you are in default of the lease, if you didn't act honestly and fairly with the tenant, and if the waiver operates as a penalty.