Commercial Landlords Update
Commercial Landlords Update:
Unlawful detainers (“evictions” or UDs”), even for commercial landlords require meticulous adherence to statutes and new regulations. For one landlord in a new case decided January 13th, Baca v. Kuang[1], this was a painful lesson. The landlord served a 30-day notice to terminate a commercial lease and then filed an unlawful detainer case, however, for three months the landlord continued to send out bills to the tenant for rent and common area maintenance (“CAM”) charges, and also “unconditionally” accepted three months of rent payments from the tenant. While the landlord initial was successful with the UD, the Court of appeal ruled against the landlord, holding that the landlord’s acceptance of rent without objection or without returning the payments to the tenant created a presumption that the landlord consented to a month-to-month renewal of the lease. That’s a problem.
Commercial landlords cannot send out a notice of default (or a notice of termination) and also accept rent without the court determining that the landlord consented to a month-to-month possession and continuation of the lease, allowing the tenant to continue to occupy the premises. This is true despite the commercial lease having a number of typical clauses addressing issues such as holdover, non-waiver by landlord of the breach even after the landlord accepts rent, and tenant obligations surviving expiration of the lease.
Landlord in this case accepted rent after the Notice of Termination and never returned or offered to return any of the rent payments made by Kuang after the Termination Notice expired. The court decision also is silent about the landlord sending any letter saying that acceptance of the rent does not waive the landlord’s rights, etc. or at least stating that the rent was being held without prejudice to landlord’s right to recapture possession of the premises.
At the underlying UD trial, the landlord representative testified that the landlord’s understanding of the law was that the landlord could accept rent payments from the tenant and still sue to evict the tenant. However, the tenant argued that by accepting rent, there was a presumption that the lease had been renewed under California Civil Code §1945, and that the landlord failed to rebut the presumption. Civil Code §1945 states:
If a lessee of real property remains in possession thereof after the expiration of the hiring, and the lessor accepts rent from him, the parties are presumed to have renewed the hiring on the same terms and for the same time, not exceeding one month when the rent is payable monthly, nor in any case one year.
The Court of Appeal reversed the trial court, determining that the landlord’s acceptance of the rent payments after the Termination Notice created a presumption of it being a month-to-month tenancy under Civil Code §1945, noting that the landlord did not return or offer to return the payments and the landlord did not inform the tenant that the rent payments were being retained as holdover damages.
The Court of Appeal stated that the only way the landlord could pursue an unlawful detainer against the tenant was by starting all over and serving a new 30-day notice not accepting any rent payments.
Commercial landlords should also remember our update about lease termination notice requirements for a “qualified commercial tenant” per California Senate Bill 1103 that became effective January 1, 2025. See our client update https://eppscoulson.com/commercial-landlords-pay-attention/ For additional information regarding commercial leases, enforcement and liability avoidance, contact dawn@eppscoulson.com.
Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney. It is likely considered advertising. Epps & Coulson, LLP encourages you to call to discuss these matters as they apply to you or your business. Epps & Coulson, LLP has staff licensed in France and affiliated Counsel offices in New York and Connecticut with lawyers also admitted in Connecticut, District of Columbia Massachusetts (pending), New Jersey, Hawaii, European Union, England and Whales, France (Paris Bar) and Sweden.
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[1] https://law.justia.com/cases/california/court-of-appeal/2025/a171071.html