Waiving the Right to Evict by Accepting Late or Partial Rent

Of course, you want to ensure that all tenants pay full rent on time every month. But you’re not just a landlord but also a businessperson who understands that half a loaf is often better than no loaf at all, especially when times are tough. Why not just cut a tenant who’s struggling with liquidity or other financial challenge a little slack? After all, we’re talking just one or two months. You can always lay down the law later if the situation doesn’t improve.

Right?

Wrong!

By accepting late rent today, you may be forfeiting your right to evict the tenant for paying late again in the future. The trap comes from a legal principle known as waiver and, as many landlords learn the hard way, it can happen inadvertently when you give late-paying tenants breaks that you intend and understand as being only temporary.

Accepting Late Payment Waives Landlord’s Right to Evict

A recent victim of the inadvertent waiver trap is a North Carolina landlord that had trouble getting its tenant to pay rent during the initial COVID-19 outbreak. We just want to let you know that we’re invoking the force majeure clause and not paying full rent in April, May, June, or July, the tenant wrote, but we’re loyal tenants and promise to make it up to you as soon as possible.

But the landlord was having none of it. Pay the full April rent of $15,983.30 by April 13 or we’ll consider you in default and pursue all of our lease remedies, it replied. The tenant didn’t pay by April 13. So, the landlord sent the tenant another 10-day warning on April 27, and still another on May 12, when the tenants failed to pay their May rent. Nothing happened. Finally, on June 8, the tenant sent a check covering full June rent. The landlord accepted the payment. But at the end of June, with the $32,573.04 balance still unpaid, it decided enough was enough and went to court to evict.

The landlord thought it had an open-and-shut case. So, it asked for summary judgment—that is, a ruling in its favor without a trial. The North Carolina court did grant summary judgment—but for the tenant instead. The landlord would have won on summary judgment, the court explained, but for the fact that it waived its right to evict. “Acceptance of rent by the landlord, with full knowledge of a breach in the conditions of the lease, will ordinarily be treated as an affirmation by him that the contract of lease is still in force.” And that’s exactly what the landlord did by accepting June rent after issuing no fewer than three warnings for nonpayment [Grace Ridge Gateway Terrace Durham v. Mattress Firm, 2022-NCCOA-102, 2022 N.C. App. LEXIS 91].

How to Protect Against Inadvertent Waiver

One way to avoid committing the same mistake is to stand your ground and expressly reject the tenant’s late or partial payment. But while it will preserve your eviction rights, forgoing late or partial payment will also prolong the impasse and leave you without any of the rent money. The good news is that you may be able to accept payment from a tenant still in default without forgiving the violation or waiving your rights to enforce the lease in the future. It depends on whether the lease includes a non-waiver clause specifying that:

• The landlord’s delay in exercising a lease right or remedy will not be construed as a waiver of the right or remedy;
• For any waiver of the landlord’s right to be effective, it must be in writing; and
• Acceptance of any payment made by the tenant that’s not in full compliance with the terms of the lease—like a partial or late rent payment—won’t be considered a waiver of the right to receive the proper payment, regardless of the notation on the check or any accompanying materials.

Ask your attorney to adapt the following language for your leases:

Model Lease Language

No Waiver by Landlord. No delay or forbearance by Landlord in exercising any right or remedy under this Lease shall be construed to be a waiver of Landlord’s rights. Waiver by Landlord of any breach by Tenant of any covenant or condition herein contained (which waiver shall be effective only if so expressed in writing by Landlord) or failure by Landlord to exercise any right or remedy in respect of any such breach shall not constitute a waiver or relinquishment for the future of Landlord’s right to have any such covenant or condition duly performed or observed by Tenant, or of Landlord’s rights arising because of any subsequent breach of any such covenant or condition nor bar any right or remedy of Landlord in respect of such breach or any subsequent breach. Landlord’s receipt and acceptance of any payment from Tenant which is tendered not in conformity with the provisions of this Lease or following an Event of Default (regardless of any endorsement or notation on any check or any statement in any letter accompanying any payment) shall not operate as an accord and satisfaction or a waiver of the right of Landlord to recover any payments then owing by Tenant which are not paid in full, or act as a bar to the termination of this Lease and the recovery of the Premises because of Tenant’s previous default.

You should also make it clear to the tenant that you still object to the violation and demand that the tenant cure it even though you’re accepting the late or partial payment.

When Accepting Late Rent Is Not a Waiver

A venerable 1986 case is an excellent illustration of how these principles play out in real life. It began when a New York City landlord gave a parking garage tenant behind on its rent 15 days to “cure” the default or face eviction. The deadline passed, but the landlord didn’t bring an eviction suit. A few weeks later, the tenant sent the landlord a check for the rent. It continued to pay rent late through the remaining 16 months of the lease. While repeatedly asking the tenant to cure, the landlord accepted each late payment and didn’t try to evict until the lease term expired. But the tenant wanted to renew and claimed that by accepting late payments the landlord waived its right to terminate the lease.

The New York Court of Appeals ruled that there was no waiver. Accepting rent from a tenant that it knows to be in violation of the lease is normally a waiver of the landlord’s right to terminate for the violation, said the Court. However, it continued, accepting rent doesn’t amount to a waiver if such an inference would “frustrate the reasonable expectations of the parties” as set out in the express terms of the lease. The lease in this case specifically said that “receipt by [Landlord] of rent with knowledge of the breach of any covenant in this lease shall not be deemed a waiver.” The language was “clear and unambiguous” and accepted by both sides. Result: The landlord didn’t waive its termination rights by accepting late rent payments and the tenant couldn’t renew [Jefpaul Garage Corp. v. Presbyterian Hospital, April 1984].