Daily Development for
Thursday, December 14, 1995

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

DIRT readers: I'm interested in knowing whether other states have a statute similar to Montana's here. I know that there are common law "waiver" doctrines also, but I assume those could be drafted around.

LANDLORD AND TENANT; EVICTION; WAIVER: A landlord's right to terminate a lease as a result of a tenant's breach under the lease is waived each month in which the landlord accepts full payment of rent after the occurrence of said breach, provided the landlord knew of the breach prior to accepting rent. Kreger v. Francis, 898 P.2d 672 (Mont. 1995).

Landlords continued to accept monthly payments of rent after expiration of the required tenants' renters insurance policy and after the landlords commenced an eviction action because of the breach of the insurance requirement. A Montana statute provides:

"Acceptance by the landlord of full payment of rent due with knowledge of a tenant's default or acceptance by the landlord of a tenant's performance that varies from the terms of the rental agreement constitutes a waiver of landlord's reight to terminate the rental agreement for that breach unless otherwise agreed after the breach has occurred. The acceptance of partial payment of rent due does not constitute a waiver of any right." MCA 70-24-423

Held: Because the landlords continued to accept full payment of rent after the occurrence of the breach that was known to the landlords, the landlords waived their right to terminate the lease for each month that they accepted such rent payments. Accordingly, the landlords had no grounds to bring an eviction action against the tenants and the landlords were not entitled to an award for costs and fees.

Dissent: Acceptance of rent waives no breach other than the nonpayment of rent. Precluding a landlord from accepting rental payments as a condition to enforcing unrelated terms of the contract ignores the statutory requirement that a landlord has a duty to mitigate damages and has the effect of punishing a landlord twice where a tenant breaches a rental agreement in some manner other than by the nonpayment of rent.

Comment: The majority ruling puts the landlord in the impossible position deciding between tolerating a disputed non-rent default and losing rent for the period of the dispute. Why should this be? In what way was the tenant misled by the landlord's conduct?

There are a number of ways in which the court could have construed the statute to reach a more appropriate result. The case is wrong and dumb. But, as they say, "it's the law."

Note that it would be quite difficult to "draft around" this problem, particularly in light of the extreme reading given the statute by the court. Probably corrective legislation will be necessary.

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