Daily Development for
Thursday, November 2, 2000
By: Patrick A. Randolph,
Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu
LANDLORD/TENANT; DEFAULT;
NOTICE: Absent a statutory mandate or a controlling provision in the commercial
lease, landlord's decision to enforce a default cure period was effective only
upon actual receipt of a written notice by tenant, and unclaimed certified mail
letter was insufficient.
Grenfell v. Anderson, 989
P.2d 818 (Mont. 1999).
Anderson agreed to lease
some space in a commercial property owned by Grenfell in 1989. Anderson was to
pay rent and utilities to Grenfell. The lease stated that if Anderson failed to
perform any obligation and to remedy the same within 10 days after receiving
notice thereof, Grenfell was entitled to repossess the premises and enjoy the
same as if the lease had not been made. The lease also provided that there
could be no assignment or change of use without landlord's prior consent.
The method for providing
notice and notice addresses were not specified in the lease. Grenfell, however,
had in the past made a practice of delivering utility bills and other
correspondence to the premises or to one of Anderson's other business
locations.
Anderson subleased a
portion of the leased premises to Bice. Grenfell knew of and did not object to
this sublet, although it was done without Grenfell's consent (arguably required
in the lease, since it was a different use than Anderson's). In 1991, Anderson
had vacated the premises, told Bice to leave the other portion, and sought to
lease the entire premises to a third party. Although the sublet to Bice had
been for a retail purpose, the lease to the third party did not appear even to
be for a retail purpose, and consequently almost certainly invoked a duty to
obtain Grenfell's consent, which Anderson did not do.
After learning of the
intended sublet, Grenfell sent a default notice on October 17, 1991, via
certified mail, to an address listed in the lease but not specified as a notice
address, stating that rent and utilities were past due, and that Anderson had
until October 28, 1991, to bring the balance current or Grenfell would retake
possession of the premises. The certified letter was never claimed at the post
office. Having no response from Anderson, Grenfell changed the locks. Grenfell
sued for breach of the lease. The trial court concluded that Anderson had
refused the certified letter giving notice of his default and that he was
therefore in default under the lease. Anderson appealed.
The Supreme Court of
Montana reversed the trial court, holding that the trial court had erred in
equating an unclaimed letter sent to an address that was not a notice address
with a refused letter. Because an unclaimed letter typically means that the
postal service left a notice at the address and that the mail could be
retrieved at the post office, together with the fact that Grenfell had usually
delivered correspondence to the premises or Anderson's other business
addresses, the Court reasoned that the certified letter was sent to an
uncertain address and did not result in constructive notice to Anderson. In the
course of an earlier dispute between the parties (since resolved), a certified
letter sent to the same address had also been returned undelivered.
The court noted that there
was a difference between "notice of default" and "knowledge of
default." Obviously Anderson know of some of the defaults, at least, but
he was not aware that Anderson intended to resort to formal lease remedies
unless and until he received the required ten day notice.
The trial court had held that, in the absence of a lease provision
defining notice, "common law notice requirements" apply, and appeared
to conclude that common law notice requirements meant notice intended to reach
the recipient. The Supreme Court disputed that the notice in this case met that
standard, but in any event held that under common law the notice is effective
only upon actual receipt. In a prior case, even where the lease provided that
"the notice be sent by registered mail, addressed to lessees at the said
premises," notice sent in compliance with the requirement was ineffective
when it could be shown that the intended parties did not receive the notice. Further,
the effective date of the notice is the date that it is received.
The lessor also had convinced the trial court that the Anderson was
on constructive notice of the contents of the notice because he had refused
deliberately to receive the letter. The supreme court responded that the mere
fact that the letter was returned unopened did not indicate this to be the
case, and that the parties had not stipulated clearly or through their conduct
that the sending of a letter to that address would accomplish notice. Prior
contacts between the parties generally had been by delivery to Anderson at one
of his business addresses. Hence, even if he did refuse the letter, Anderson
could not have known that it contained an official notice. Comment: Certainly a good lesson to drafters with
regard to specificity of notice provisions. Note that the typical "mailbox
rule," that notice is effective when mailed, is reversed when the parties
indicate in their lease some method by which notice will be effected. Note also
that the lack of specificity here as to when and how actual notice would be
effective caused a whole lot of grief for the drafter's client.
Readers are urged to respond, comment, and argue with the daily
development or the editor's comments about it.
Items in the Daily Development section generally are extracted from the
Quarterly Report on Developments in Real Estate Law, published by the ABA
Section on Real Property, Probate & Trust Law. Subscriptions to the
Quarterly Report are available to Section members only. The cost is nominal.
For the last six years, these Reports have been collated, updated, indexed and bound
into an Annual Survey of Developments in Real Estate Law, volumes 1‑6,
published by the ABA Press. The Annual Survey volumes are available for sale to
the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312)
988 5590 or mtabor@staff.abanet.org
Items reported here and in the ABA publications are for general information
purposes only and should not be relied upon in the course of representation or
in the forming of decisions in legal matters. The same is true of all
commentary provided by contributors to the DIRT list. Accuracy of data and
opinions expressed are the sole responsibility of the DIRT editor and are in no
sense the publication of the ABA.
Parties posting messages to DIRT are posting to a source that is readily
accessible by members of the general public, and should take that fact into
account in evaluating confidentiality issues.
ABOUT DIRT:
DIRT is an Internet discussion group for serious real estate professionals.
Message volume varies, but commonly runs 5 ‑ 10 messages per workday.
Daily Developments are posted every workday.
To subscribe to Dirt, send an e-mail to:
To: |
ListServ@listserv.umkc.edu |
Subject: |
[Does not matter] |
Text in body of message |
Subscribe Dirt [your name] |
To cancel your subscription to Dirt, send an e-mail to:
To: |
ListServ@listserv.umkc.edu |
Subject: |
[Does not matter] |
Text in body of message |
Signoff Dirt |
For information on other commands, send the message Help to the listserv
address.
DIRT has an alternate, more extensive coverage that includes not only
commercial and general real estate matters but also focuses specifically upon
residential real estate matters. Because real estate brokers generally find
this service more valuable, it is named “Brokerdirt.” But residential
specialist attorneys, title insurers, lenders and others interested in the
residential market will want to subscribe to this alternative list. If you
subscribe to Brokerdirt, it is not necessary also to subscribe to DIRT, as
Brokerdirt carries all DIRT traffic in addition to the residential discussions.
To subscribe to Brokerdirt, send an e-mail to:
To: |
ListServ@listserv.umkc.edu |
Subject: |
[Does not matter] |
Text in body of message |
Subscribe Brokerdirt [your name] |
To cancel your subscription to Brokerdirt, send an e-mail to:
To: |
ListServ@listserv.umkc.edu |
Subject: |
[Does not matter] |
Text in body of message |
Signoff Brokerdirt |
DIRT is a service of the American Bar Association Section on Real Property,
Probate & Trust Law and the University of Missouri, Kansas City, School of
Law. Daily Developments are copyrighted by Patrick A. Randolph, Jr., Professor
of Law, UMKC School of Law, but Professor Randolph grants permission for
copying or distribution of Daily Developments for educational purposes,
including professional continuing education, provided that no charge is imposed
for such distribution and that appropriate credit is given to Professor
Randolph, DIRT, and its sponsors.
DIRT has a WebPage at: http://www.umkc.edu/dirt/