Beware of Accepting Post-Eviction Rent from Tenant

Sometimes, when a tenant’s retail business is in trouble, instead of closing the tenant will try to find a buyer. If the owner had previously obtained an eviction order because the tenant had defaulted on its rent obligations, things can get complicated, especially in a situation where the tenant offers to pay the back rent, plus an additional amount in exchange for the owner allowing it to stay in the space until it has a buyer. Owners should be aware that such a scenario can be dangerous. Accepting rent—regardless of the scenario or who is paying it—after terminating a lease, and certainly after obtaining an eviction order, might compromise the landlord’s position and have the unintended result of reviving the tenant’s rights to the space. A recent case on point demonstrates one of the possible risks—that a tenant could use that time and access to the space to remove valuable items, such as fixtures. And a court could decide that the tenant is within its rights to do so.

In that case, a restaurant tenant faced with an eviction order offered the owner of the space $40,000 to extend the time it could use the space after it was supposed to vacate. The tenant wanted to use the extra time to work out a deal with a potential buyer of the restaurant, who planned to use the same space. The deal fell through, however. In the meantime, the tenant tried to remove some of its trade fixtures and equipment; the owner’s representative refused to allow this. The tenant sued the owner for conversion—that is, essentially taking its belongings without its consent. The tenant and the owner each asked a trial court for a judgment in its favor without a trial. The trial court ruled in favor of the owner. The tenant appealed.

A Georgia appeals court reversed as to the conversion claim, ruling that the tenant could remove the fixtures during the unofficial extension period. The appeals court concluded that a genuine issue of material fact existed as to whether the owner, in exchange for the $40,000 payment from the tenant, had inadvertently agreed to extend the tenant’s time of possession—and thereby its right to the trade fixtures and the option to remove them during that time period. A trial was needed to make that determination [Heany v. Bennett Street Properties, LP, March 2016].