Tenant Inadvertently, Not ‘Willfully,’ Held Over Space

Facts: A tenant and owner negotiated a four-month lease for commercial space, with an option to renew on a month-to-month basis. The tenant failed to pay rent for two months in a row, but asked the owner to extend the lease for an additional month past the original lease term. The owner agreed to the extension, provided that the tenant pay past due rent and fees and pay the additional month’s rent. The tenant agreed, but ultimately failed to follow through with the correct number of rent payments.

The owner sought to evict the tenant. It asked a district court to award it double damages—that is, twice the amount that the tenant owed it according to the terms of the lease—under a state statute that allowed a double recovery for owners whose tenants “willfully” held over their spaces. The tenant argued that it had mistakenly but not willfully held over, under the belief that it had sent the correct number of rent checks required by the owner to allow it to stay in the space for another month. A court ruled in the owner’s favor as to the eviction, but denied its request for double damages. The owner appealed.

Decision: The North Dakota Supreme Court upheld the judgment denying double damages. 

Reasoning: The appeals court agreed with the district court’s conclusion that the tenant held over, but that the holdover was not “willful” for purposes of awarding the owner double damages. The double damages statute didn’t define the term willful, but the appeals court looked to past cases for guidance. It determined that a tenant willfully holds over if “the holding over is done so intentionally and not inadvertently.” Here, because of an omission in the letter from the owner to the tenant regarding its request to extend the lease, there was confusion on the tenant’s part as to whether two or three payments were sufficient for it to stay in the space. The owner had meant to require three payments to extend the lease. However, the appeals court stated that the correspondence between the owner and tenant created legitimate confusion as to what conditions the tenant was required to fulfill in exchange for the extension and that as a result of the confusion the tenant made an incorrect number of payments. Therefore, it had inadvertently, not willfully, held over.

• Cheetah Properties 1, LLC v. Panther Pressure Testers, May 2016