Owner's Conduct Causes Lease Modification and Waiver

A tenant signed three consecutive leases with an owner. The first two leases permitted the tenant to make alterations at its space with the owner's oral approval, but the third lease required the owner's written approval. During the third lease, the tenant made extensive alterations without getting the owner's written approval. The owner sued the tenant for violating the lease and asked the court to terminate the lease.

A Louisiana appeals court ruled that the tenant hadn't violated the lease. The court noted that the evidence showed that the owner had orally approved the tenant's extensive alterations. And only oral approval was required, said the court, because the owner's conduct had modified the third lease. That is, the owner had a history of orally approving the tenant's alterations during the previous two lease terms without demanding its written approval. Plus the owner waived its right to terminate the third lease by failing to take any legal action or object to the tenant's extensive alterations (aside from an initial attorney's letter) for over three years after it had inspected the tenant's alterations work [Karno v. Joseph Fein Caterer, Inc.].

* Owner Violated Lease by Drawing Down Full Amount of Letter of Credit

A lease required the tenant to give a security deposit that consisted of both cash and a letter of credit. When the tenant filed for bankruptcy, it owed rent and other charges. The owner took the cash part of the security deposit and drew down the full amount of the letter of credit. The court later determined the amount of the owner's damages, which were capped by bankruptcy law. This capped amount was less than the total amount of the cash and letter of credit that the owner had taken. So the tenant's trustee sued the owner for violating the lease by improperly drawing down the full amount of the letter of credit.

A bankruptcy court in Texas ruled that the owner had violated the lease by improperly drawing down the full amount of the letter of credit. The court said that the law required any security deposit to be applied against the owner's capped damages claim. The court rejected the owner's argument that this requirement didn't apply to letters of credit because the lease in this case defined the security deposit to include the letter of credit. Drawing down the letter of credit in an amount “over and above” the capped damages amount was a lease violation, the court said [In re: Stonebridge Technologies, Inc.].

* Owner Unreasonably Withheld Its Consent to Assignment

A lease said that the tenant must get the owner's written consent to a lease assignment. The lease also said the owner wouldn't “unreasonably withhold” such consent. The tenant began having financial problems, so it found a proposed assignee. The tenant and the proposed assignee told the owner that they needed to move quickly. The owner said it would prepare the assignment documents. But the owner delayed for almost a year and eventually refused to consent. The tenant sued the owner for violating the lease by unreasonably withholding its consent.

A California appeals court ruled that the owner had unreasonably withheld its consent. The owner had delayed giving its consent to the assignment while it tried to sell the property. Through its “stall tactics,” the owner unreasonably withheld its consent, the court said [USRP (RIBBIT), LLC v. Rowley Petroleum Lakewood, LLC].

* Manager Didn't Have Authority to Consent to Police Search of Tenant's Space

A woman disappeared after meeting with her estranged husband. Her family called the police and told the investigator that the woman and her husband had been renting a storage unit. The investigator went to the storage unit facility and spoke to the manager. The manager confirmed that the woman and her husband were renting a storage unit. She said that she had a key to the unit and, under the lease, the authority to enter it. The manager unlocked the unit. The investigator stepped inside the unit and discovered the woman's bloody body. The investigator took the body and other evidence from the unit. The husband was arrested and asked the court to suppress the evidence taken from the storage unit.

A Minnesota appeals court ruled that the manager didn't have the authority to let the police search the storage unit. The court noted that landlords, including storage unit owners, generally don't have the authority to consent to warrantless searches of their tenants' spaces. Since the lease only gave the manager a limited right to enter the unit for such purposes as to clean, repair, alter, or improve the unit, the police couldn't rely on the manager's consent to the search to avoid suppression of the evidence taken from the unit, the court said. But the court ordered a new hearing to consider other theories why the search of the unit was legal [State v. Licari].

* Center Not Liable for Child's Injuries in Parking Lot

A child fell out of a shopping cart when it hit a crack in the pavement of the tenant's parking lot. Since the tenant had filed for bankruptcy, the child's parents sued the center, claiming that it had negligently maintained the parking lot. The center asked the court to dismiss the lawsuit, arguing that the tenant—not the center—was responsible for maintaining the parking lot.

A federal court in Massachusetts dismissed the lawsuit against the center. The lease said that the tenant was responsible for maintaining the space, which included the “Land and Improvements, and all sidewalks and curbs appurtenant.” The court concluded that, according to this statement, the tenant was responsible for maintaining the parking lot. Since the center had no duty to maintain the parking lot—and had, in fact, never repaired or performed maintenance on the parking lot—it couldn't be held liable for the child's injuries, the court said [Cardinal v. Daniel G. Kamin Palmer, LLC].