by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
randolphp@umkc.edu

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.

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 five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. Contact Shawn Kaminsky at the ABA. (312) 988 5260.

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. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.