Payment & Acceptance of Holdover Rent ≠ Lease Renewal

March 29, 2024

What Happened: An office tenant didn’t exercise its renewal option on a lease that expired in April 2022. However, the tenant continued to pay, and the landlord continued to accept rent after the expiration date. A few months later, when the tenant ran into problems that interfered with his ability to conduct business in the office, he sued the landlord for breach of the implied warranty of liability and other alleged lease violations.

What Happened: An office tenant didn’t exercise its renewal option on a lease that expired in April 2022. However, the tenant continued to pay, and the landlord continued to accept rent after the expiration date. A few months later, when the tenant ran into problems that interfered with his ability to conduct business in the office, he sued the landlord for breach of the implied warranty of liability and other alleged lease violations. There is no lease to violate, the landlord claimed, citing Article 19.02 of the original lease, which stated that in the event the tenant became a holdover tenant upon expiration it wouldn’t result in a lease renewal. The trial court agreed that the lease hadn’t been renewed and that the tenant was a holdover.

Ruling: The Indiana appeals court rejected the tenant’s appeal.

Reasoning: Payment and acceptance of rent from a holdover tenant after the lease expires normally constitutes a lease renewal, the court acknowledged. However, it quickly added, this is true only when there’s no agreement to the contrary. There was an agreement to the contrary in this case—namely, Article 19.02. And while it doesn’t expressly mention rent payments, the provision clearly states the sides’ agreement that a holdover tenancy won’t result in a renewal of the lease, the court concluded. 

  • Allen v. Hammond Hohman LLC, 2024 Ind. App. Unpub. LEXIS 121, 2024 WL 412489

 

Topics

More like this