By Sheldon A. Halpern and Angela Heyming

Imagine that you are a commercial landlord trying to collect rent from one of your tenants. The due date has passed. After several notices to the tenant, you still have not received payment. Consequently, you begin eviction proceedings. Then a partial rent payment arrives. What happens if you accept the money? Will you still be able to pursue the eviction and recover damages?

A landlord faced this dilemma in Woodman Partners v. Sofa U Love, 94 Cal. App 4th 766 (2001), rev. denied February 27, 2002. The facts of Woodman Partners were relatively simple. After a dispute over a tenant’s failure to pay rent under a commercial lease, the landlord served the tenant with a “Three-Day-Notice to Pay Rent or Quit,” which is the first-step in California’s unlawful detainer process. The notice was silent on whether the landlord could accept partial payments without waiving its rights.

The three-day period expired, and the landlord filed an unlawful detainer complaint. Sometime later, the tenant made a partial payment of the rent owed. Two days after the payment, the landlord’s counsel sent the tenant a letter stating that the landlord was accepting the partial payment but was proceeding with the eviction action and did not waive any of its rights or remedies.

The trial court allowed the landlord to evict the tenant and awarded the landlord damages, possession of the premises, forfeiture of the lease and attorneys’ fees. The tenant appealed.

On appeal, the tenant contended that the landlord could not evict the tenant because the landlord failed to provide advance or concurrent notice that its acceptance of partial rent would not waive the landlord’s rights.
The court noted that California Code of Civil Procedure Section 1161.1(c) specifically provides that a landlord’s acceptance of partial rent after filing an unlawful detainer complaint does not waive any rights or defenses if the landlord provides actual notice to the tenant that acceptance of the partial payment will not be a waiver of any rights, including the right the landlord may have to recover possession of the property.

The landlord argued that the letter from its counsel was sufficient. The tenant, by contrast, argued that the letter was insufficient because it was sent after the partial payment was received.

The court agreed with the tenant. It concluded that a notice of the landlord’s non-waiver of rights must be communicated to the tenant before the landlord accepts the partial payment. Since the letter from the landlord’s attorney was sent to the tenant after the tenant sent the partial payment, the letter could not be construed to be the requisite advance or contemporaneous notice of non-waiver.

Despite the agreement, the court found in favor of the landlord. Looking beyond the “superfluous” letter, the court pointed to a provision in the lease stating that “[t]he acceptance of rent hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of any provision hereof, other than the failure of Lessee to pay the particular rent so accepted.”

The court accepted the use of the term “breach” as short-hand for rights and remedies and, given that the tenant had entered into the lease long before the partial rent payment was either made or accepted, found the lease provision adequate to satisfy the actual notice requirement under Section 1161.1(c). As a result, the landlord was able to evict the tenant. The landlord was saved by the lease’s boilerplate language.

Under Woodman Partners, a commercial landlord can safely collect partial rent payments after initiating eviction proceedings without worrying that the collection will bring to a halt the landlord’s rights and remedies against the tenant if the advance notice requirement of Section 1161.1(c) is satisfied. This advance notice requirement apparently can be satisfied by stating in the landlord’s form lease that acceptance of partial rent will not constitute waiver, or, as the court suggested in a footnote, by including such non-waiver language in any Three-Day Notice sent. Although putting the language in either the lease or the Three-Day Notice appears to be satisfac-tory, to preserve an ability to collect partial rent payments after filing an unlawful detainer complaint, commercial landlords should act cautiously and put the language in both places.