Did Tenant Waive Right to Rent Abatement?

A tenant's lease allowed it to pay abated rent if a supermarket tenant moved out. The supermarket tenant moved out in December 1999, but the tenant continued to pay its full rent. When the tenant's corporate office learned in December 2000 that the supermarket had moved out, it stopped paying rent. The owner notified the tenant that it was violating its lease by not paying its rent. The tenant replied that it had been entitled to pay abated rent beginning December 1999, and because it had been paying its full rent since that date, it had overpaid. So it wasn't going to pay any rent until the overpayment had been exhausted. The owner sued the tenant for violating its lease and for rent due.

An Arkansas appeals court ruled that a jury would have to decide if the tenant had “waived—that is, given up—its right to pay abated rent. The court noted that neither the owner nor the tenant's employees had notified the tenant's corporate office that the supermarket had moved out. But the tenant's employees could easily see that the supermarket—located 144 feet from the tenant's space—was no longer open and operating. The jury would have to decide if the employees' knowledge of the supermarket's move could be imputed to the tenant corporation, resulting in a waiver of the tenant's right to pay abated rent, the court said [Cato Corp. v. Phillips Investments, Inc.].