Rent Acceleration OK Because Tenant Didn't Make Tax Reimbursement in Time

January 1, 2006

A lease required the tenant to reimburse the owner, as part of its next monthly rent payment, for taxes the owner had paid. On March 16, the owner requested a tax reimbursement of $9,743. The tenant refused to pay because it disputed “various other items of money due.” The owner again demanded the tax reimbursement. The tenant finally sent a check for the tax reimbursement on May 14, but the owner sent it back because it was too late. The tenant sued the owner.

A lease required the tenant to reimburse the owner, as part of its next monthly rent payment, for taxes the owner had paid. On March 16, the owner requested a tax reimbursement of $9,743. The tenant refused to pay because it disputed “various other items of money due.” The owner again demanded the tax reimbursement. The tenant finally sent a check for the tax reimbursement on May 14, but the owner sent it back because it was too late. The tenant sued the owner. In response, the owner tried to accelerate the rent due for the remainder of the term and bar the tenant from exercising its renewal option.

A Louisiana appeals court ruled that the owner could accelerate the tenant's rent and bar the tenant from exercising its renewal option. The court determined that the tenant defaulted on the lease by not making the tax reimbursement when it was due. And the lease specifically said that when the tenant defaults, the owner has the right to “accelerate the full amount due [from the tenant] under the term then in effect.” Also, the court noted that the lease conditioned the tenant's right to exercise its renewal option on the tenant's not being in default. Because the tenant couldn't meet that condition, it couldn't exercise the renewal option [Southern Marine Sales, Inc. v. Matherne].

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