Landlords Can Waive Goodbye to Their Lease Rights by Accepting Rent Payments With Knowledge of the Tenant’s Defaults
Print Article- Posted on: Jul 26 2024
Today’s Blog article addresses the issue of waiver of lease rights. Frequently, litigation involves the question of whether a party waived certain of its rights; whether contractual or otherwise. “A valid waiver requires no more that the voluntary and intentional abandonment of a known right which, but for the waiver, would have been enforceable.” Cavayero v. Cavayero, 184 A.D.3d 801, 802 (2nd Dep’t 2020) (citations, internal quotation marks and brackets omitted). A “[w]aiver may be accomplished by express agreement or by such conduct or failure to act as to evince an intent not to claim the purported advantage.” Bono v. Cucinella, 298 A.D.2d 483, 484 (2nd Dep’t 2002) (quoting Hadden v. Consolidated Edison Co. of New York, Inc., 45 N.Y.2d 466 (978). Put another way, “waiver should not be lightly presumed and must be based on a clear manifestation of intent to relinquish a contractual protection.” Van Der Velde v. New York Property Underwriting Assoc., 205 A.D.3d 970, 972 (2nd Dep’t 2022) (citations and internal quotation marks omitted). Conversely, a “waiver is not created by negligence, oversight, or thoughtlessness, and cannot be inferred from mere silence.” Golfo v. Kycia Assoc., Inc., 45 A.D.3d 531, 533 (2nd Dep’t 2007) (citation and internal quotation marks omitted).
The question of whether a waiver has occurred is often litigated in landlord/tenant matters. The issue frequently arises when a landlord accepts rent payments from a tenant despite a default under the subject lease. “When rent is accepted with knowledge of particular conduct which is claimed to be a default, the acceptance of such rent constitutes a waiver by the landlord of the default.” Atkin’s Waste Materials, Inc. v. May, 34 N.Y.2d 422, 427 (1974) (citation omitted); Madison Ave. Leasehold, LLC v. Madison Bently Assoc. LLC, 30 A.D.3d 1, 6 (1st Dep’t 2006) (quoting Atkin’s), aff’d, 8 N.Y.3d 59 (2006).
For these reasons, many commercial leases have provisions that expressly provide that the acceptance of rent by the landlord despite a known breach, will not operate as a waiver. See, e.g., Excel Graphics Technologies, Inc. v. CFG/AGSCB 75 Ninth Ave., L.L.C., 1 A.D.3d 65, 68-70 (1st Dep’t 2003); Sunoce Properties, Inc. v. Bally Total Fitness of Greater New York, Inc., 48 N.Y.S.3d 476, 478 (2nd Dep’t 2017); Jefpaul Garage Corp. v. Presbyterian Hosp. in City of New York, 61 N.Y.2d 442, 446 (1984). The efficacy of such provisions are generally accepted. Notwithstanding such provisions, however, courts have found that even non-waiver provisions in a contract can be waived. TSS-Seedman’s, Inc. v. Elota Realty Co., 72 N.Y.2d 1024, 1027 (1988). The Court in TSS-Seedman stated:
Finally, we reject defendant’s contention that, because the leases contained “nonwaiver” clauses, acceptance of the withheld rents did not prevent it from terminating the leases. Under the circumstances present here, acceptance of the rent waived the default.
Id. See also Madison Ave., 30 A.D.3d at 6 (relying on TSS-Seedman).
The issue of waiver in the context of a commercial lease was addressed by the Appellate Division, Second Department, in DVK Realty, LLC v. Cremb Realty, Inc., a case decided on July 24, 2024. In 1977, the defendant landlord’s predecessor entered into a commercial lease with DVK Realty, Inc., as tenant. The lease was amended to, inter alia, provide for an option to extend the lease term to 2033. “In 1998, the plaintiff’s manager sent the defendant’s predecessor a letter stating that DVK Realty, Inc., had been converted from a corporation to a limited liability company, i.e., the plaintiff.” Thereafter, in 2000, the defendant acquired title to the subject premises and accepted monthly rent payments from the plaintiff for 20 years.
The plaintiff’s attempt to exercise its option to extend the lease to 2033 was rejected by the defendant, new landlord. The landlord advised the tenant that “the plaintiff was currently occupying the premises without the benefit of a lease.” When the defendant took steps to terminate the lease, the plaintiff commenced a declaratory judgment action by which it sought a declaration that it was the tenant under the lease and that the lease extension option was properly exercised. The defendant, landlord, moved for summary judgment declaring that the plaintiff had no rights under the lease and the plaintiff cross-moved for the relief sought in its complaint. The motion court denied the landlord’s motion and granted the plaintiff’s motion. On the defendant’s appeal, the Second Department affirmed. In so doing, the Court stated:
Here, the plaintiff established its prima facie entitlement to judgment as a matter of law by showing that the defendant waived its right to object to the plaintiff’s tenancy under the terms of the lease agreement (see Matter of Sea Cliff Delicatessen v Skrepek, 199 AD2d 510, 511; Brentsun Realty Corp. v D’Urso Supermarkets, 182 AD2d 604, 605). It is undisputed that the defendant accepted monthly rent checks from the plaintiff for approximately 20 years. Furthermore, the plaintiff demonstrated that the defendant was aware that the current tenant was the plaintiff, rather than DVK Realty, Inc., yet failed to challenge the plaintiff’s tenancy under the lease agreement until 2019, after the plaintiff sought to exercise its options under the lease agreement to extend the lease term. The plaintiff also demonstrated that the defendant acknowledged the plaintiff as the tenant under the lease agreement. In opposition, the defendant failed to raise a triable issue of fact. [Hyperlinks added.]
Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.
