A frequent claim raised by a tenant facing eviction is that the landlord waived, through its conduct, the right to evict the tenant, but the Minnesota Court of Appeals recently issued a decision in Koenig v. Koenig clarifying the extent of landlord waivers. No. A11-920, 2012 WL 762306 (Minn. App. March 12, 2012). The general and long-existing rule in Minnesota is that a landlord may waive its right to evict a tenant by allowing the tenant to remain in possession of the property and accepting rent payments after providing a notice to terminate the lease. Arcade Inv. Co. v. Gieriet, 99 Minn. 277, 279, 109 N.W. 250, 250 (1906); Christy v. Berends, No. A07-1451, 2008 WL 2796663 (Minn. App. July 22, 2008). In Koenig, however, the Court of Appeals held that a landlord who delivered a notice terminating a written lease – according to its unambiguous terms allowing either party to terminate it by notice – and a later notice terminating an implied lease did not subsequently waive its right to evict the tenant by continuing to allow the tenant to remain on the property and by accepting rent. 2012 WL 762306, at *6. In so holding, the court carefully distinguished earlier appellate decisions concerning terminations due to tenants’ breaches of leases. Id. Thus, the Koenig decision, while not making new law, does more clearly define the limits of the waiver doctrine that generally places landlords in a difficult position. The court’s decision in Koenig serves as an important reminder of a landlord’s need to be aware of waiver law and to act in a manner that ensures it does not waive its eviction rights.
The Parties’ Dispute
In Koenig, a married couple entered a written lease with their son and his wife, renting them farm land and buildings beginning January 1, 2007. 2012 WL 762306, at *1. The lease for the land expired on December 31, 2007, and required semi-annual payments on April 1 and November 1. The lease provided that it automatically renewed unless either party provided written notice of termination by September 1 of the year “prior to the expiration of this lease.” In August 2008, the landowners, through counsel, sent the tenants a letter notifying them that the lease was terminated, and in that letter stated a desire to enter a new agreement. The parties did not enter a new written agreement, but after the effective date of the termination the tenants nonetheless continued to farm the land and pay rent.
In August 2010, the landowners, again through their counsel, sent the tenants another letter, stating that parties’ agreement was an unwritten lease for a tenancy at will and that they were terminating that agreement effective three months later. The parties then became involved in litigation concerning whether the 2007 written agreement remained effective, whether the two termination notices were effective, and whether the owners waived their right to evict the tenants by allowing them to remain on the land and accepting rent payments despite the termination notice. The district court decided the issues in favor of the land owners and the tenants appealed.
Minnesota law has long held that, generally, a landlord waives its right to evict a tenant following a termination notice when it accepts the tenant’s rent payments after delivery of the notice and allows the tenant to remain on the property. Pappas v. Stark, 123 Minn. 81, 83, 142 N.W. 1046, 1047 (1913). Depending on the other facts, even an acceptance of a tenant’s automatic payment into the landlord’s bank account may constitute a waiver. Christy v. Berends, No. A07-1451, 2008 WL 2796663 (Minn. App. July 22, 2008). Waiver by acceptance of rent is not automatic and, instead, a court will review the terms of a written lease existing between the parties to determine whether waiver occurred. Minneapolis Cmty. Dev. Agency v. Powell, 352 N.W.2d 532, 534 (Minn. App. 1984). For example, a lease term providing that the acceptance of rent does not constitute a waiver may prevent a court from finding that a waiver occurred. Las Americas, Inc. v. American Indian Neighborhood Dev. Corp., No. A04-505, 2004 WL 2710061 (Minn. App. Nov. 30, 2004). Ultimately, however, waiver is typically a question to be decided by a jury, meaning that this defense will often require a trial. Minneapolis Cmty. Dev. Agency, 352 N.W.2d at 534. The waiver defense requires landlords to carefully weigh whether to continue to allow a tenant to occupy the property despite a breach or to instead reject a rent payment and move forward immediately with an eviction.
The tenants in Koenig argued that, pursuant to the well-established holding in Pappas, 123 Minn. at 83, 142 N.W. at 1047, the landowners waived their right to terminate the lease by accepting rent after the termination notice. 2012 WL 762306, at *5. The court, however, rejected the tenants’ argument because the landowner in Pappas attempted to terminate the lease due to the tenant’s violations of the lease. Id. The decision in Pappas, therefore, did not control the dispute in Koenig. Id. The court, accordingly, held that the landowners had not waived their right to terminate the unwritten at-will lease by accepting rent because their termination right “was not dependent on” the tenants’ breach of the lease. Id. at *6.
The Koenig tenants also apparently argued that the agreement existing between the parties after the landowners terminated the written contract was a year-to-year lease rather than a tenancy at will which can be terminated with shorter notice. 2012 WL 762306, at *6. A tenancy at will generally exists when a tenant occupies property with the landowner’s permission “but without a fixed ending date.” Minn. Stat. § 504B.001, subd. 13. It can be terminated pursuant to Minnesota Statutes by notice. Id., § 504B.135. If the tenant under a tenancy at will has paid rent, “[t]he time of the notice must be at least as long as the interval between the time rent is due or three months, whichever is less.” Id.(a). A court may imply a tenancy at will when a tenant “holds over pending negotiations for a new lease.” Koenig, 2012 WL 762306, at *6. The court in Koenig rejected the tenants’ arguments, affirming the district court’s finding of a tenancy at will because the tenants remained on the property with the landowners’ permission without entering a new written lease or identifying a fixed ending date. Id.
To avoid a successful waiver argument by a tenant, a landlord should exercise care after a tenant’s breach of a lease and after delivering a termination notice. An act as nominal as the acceptance of rent by automatic deposit may be deemed a waiver of the landlord’s right to evict the tenant based on an earlier breach if the landlord knew about the breach when the rent was paid. A landlord should also use a carefully-prepared written lease agreement. The language of the lease agreement will determine the manner in which the lease can be terminated and it will be closely scrutinized if a waiver argument is raised. When, however, the termination right is not based on the tenant’s breach of the lease, a waiver defense should fail.