Tenant Not Entitled to Space After Subtenant Default

July 31, 2008

Facts: The owner leased a building to a tenant that later sublet the building to a third party for the purposes of running a restaurant. Several years later, a fire damaged the building. The subtenant had the following legal options: 1) fix the damage and recover the cost from the owner; 2) sue the owner for damages; or 3) move out and claim constructive eviction—that is, being forced to leave because the space is inhabitable. Instead, the subtenant stayed in the space, but stopped paying rent to the original tenant, which in turn stopped paying the owner.

Facts: The owner leased a building to a tenant that later sublet the building to a third party for the purposes of running a restaurant. Several years later, a fire damaged the building. The subtenant had the following legal options: 1) fix the damage and recover the cost from the owner; 2) sue the owner for damages; or 3) move out and claim constructive eviction—that is, being forced to leave because the space is inhabitable. Instead, the subtenant stayed in the space, but stopped paying rent to the original tenant, which in turn stopped paying the owner.

The tenant then sued the subtenant and owner, and asked the court to: 1) eject the subtenant from the space; and 2) force the owner to acknowledge the original lease and allow it to retake possession of the space.

The trial court ruled in favor of the owner, and removed the tenant and subtenant. The tenant appealed.

Decision: A North Carolina appeals court upheld the trial court's decision.

Reasoning: The court noted that according to North Carolina case law, when a tenant fails to pay past-due rent within 10 days of the date the owner demanded payment of all past-due rent, forfeiture of the lease is implied and the owner has the right to have the tenant removed from the premises.

Editor's Note: Although it may seem that the tenant was unfairly penalized for the subtenant's failure to pay rent, the tenant in this case was ultimately responsible for the rent and failed to step in and exercise its own legal right to: 1) sue the owner for damages; 2) make the repairs and be reimbursed; or 3) terminate the lease by moving out and claiming constructive eviction.

  • Gardner v. Ebenezer, LLC and Speight, May 2008

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