Consider a commercial tenant who experiences cash flow difficulties due to a business downturn caused by a global pandemic. As a result, the tenant becomes delinquent on the payment of rent.

Discussions between the landlord and tenant follow. To enforce collection of the rent, the landlord eventually serves the tenant with a three-day notice to pay rent or quit the premises. [See RPI Form 577]

Prior to the filing of an unlawful detainer (UD) action, the tenant offers to make a partial payment of the delinquent rent, if the landlord will accept it. Further, the commercial tenant offers to pay the balance of the delinquent rent by a specific date in exchange for the landlord’s temporary deferral of any eviction activity, called a partial payment agreement. [See RPI Form 558]

The partial payment agreement states:

  • the amount received as partial rent;
  • the amount of deferred rent remaining unpaid;
  • a promise to pay the deferred rent;
  • the date the payment is due; and
  • the consequences of nonpayment.

If the deferred rent is not paid as scheduled in the agreement, the commercial landlord may file a UD action to evict the tenant without serving another three-day notice. [See RPI Form 558 §7]

Here, the partial payment agreement only temporarily delays the commercial landlord’s eviction process which commenced with the previous service of a three-day notice on the tenant.

The tenant fails to pay the deferred balance of the delinquent rent on the date scheduled for payment. Without further notice to the tenant, the landlord files a UD action.

The commercial tenant seeks to prevent the landlord from proceeding with the UD action. The tenant claims the landlord’s acceptance of the partial rent payment invalidated the prior three-day notice since the notice now states an amount of rent which is no longer due.

Can the commercial landlord accept a payment of partial rent after serving a three-day notice and later file a UD action against the tenant without serving another three-day notice for the amount remaining due and now delinquent?

Yes! A commercial landlord may accept a partial payment of rent after serving a three-day notice and before eviction. Without further notice to the tenant, the commercial landlord may proceed with a UD action and evict the tenant. [Calif. Code of Civil Procedure §1161.1(b)]

Landlord’s reservation of rights clause

On accepting a partial payment of delinquent rent, a commercial landlord does not need to agree to a new due date for the remaining rent. They also do not need to enter into any agreement regarding acceptance of the partial payment. However, the commercial tenant needs to be on notice that acceptance of late rent does not waive the landlord’s right to enforce any remaining breach of the lease. This notice is called a reservation of rights clause.

The reservation of rights clause is found in the nonwaiver of rights provision in commercial lease agreements as well as in acceptance of partial rent agreements. [See RPI Form 552 §20]

However, the commercial landlord who memorializes their acceptance of the partial rent payment and the due date for payment of the remaining balance eliminates conflicting claims the tenant may make in a UD action.

The impact of serving a three-day notice then later accepting partial rent from a commercial tenant is vastly different from the protection a residential tenant is provided in partial rent situations.

A residential landlord who accepts any amount of rent from a tenant after serving a three-day notice waives their right to use that notice as the basis for a UD action. After receiving partial rent, a residential landlord needs to serve the tenant with another three-day notice for the amount now remaining unpaid. [EDC Associates, Ltd. V. Gutierrez (1984) 153 CA3d 167]

Residential vs. commercial landlords

Acceptance of a partial payment toward delinquent rent is within the discretion of the landlord.

A landlord is be more motivated to accept partial payments when:

  • the partial payment is at least equal to the rent accrued at the time the tenant offers the payment;
  • the tenant is creditworthy;
  • the tenant has an adequate payment history; and
  • the landlord wants to retain the tenant.

Currently, residential landlords in California need to abide by the eviction moratorium in place under the Tenant, Homeowner and Small Landlord Relief Stabilization Act. Tenants from September 1, 2020 to January 31, 2021 may not be evicted if they pay 25% of each rental payment as they become due during this time period. [See RPI Form 575-2 (COVID-19) and 575-3 (COVID-19)]

Once the eviction moratorium expires, landlords may collect on the full amount of rent owed and begin the eviction process of their tenants.

Landlords are better served creating a new rental deal with their tenants now. Otherwise, tenants who are unable to repay months of missed rent will lose their homes and create a rapid rise in vacancies once the eviction moratorium ends. The result will be rent cuts and decreased values for multi-family rentals.

It is better for the landlord to have a tenant in possession and not a vacant unit. The landlord will also be able to get some rent rather than vacant zero rent. Partial rent payment agreements allow the landlord and the tenant to work out a deal which will help both in the long run.

Commercial nonwaiver requirements  

Consider a commercial landlord who serves their tenant with a three-day notice to pay rent or quit. Later, the landlord accepts a partial payment of rent under an agreement with the tenant containing a nonwaiver of rights provision. This provision states the acceptance of rent does not waive the landlord’s right to enforce a breach of the lease. If the nonwaiver notice is not given, the commercial landlord needs to serve the tenant with another three-day notice for payment of the sums remaining due and unpaid.

An alternative scenario exists since a nonwaiver of rights provision also exists in the commercial lease agreement entered into by the tenant. As a result, the tenant has received a nonwaiver of rights notice before the landlord’s acceptance of partial rent. Here, the landlord may take the money and file or continue with an already filed UD action to recover possession of the premises. [CCP §1161.1(c); See RPI Form 552 §20]

No waiver of rights

Consider a commercial tenant who defaults on a rent payment called for in their lease agreement which contains a nonwaiver of rights provision. The tenant is served with a three-day notice to pay or quit. The three-day notice to pay does not contain a provision for nonwaiver of rights on acceptance of partial rent.

The landlord then accepts a partial payment of rent without entering into any agreements, except to acknowledge receipt of the amount paid as rent. The commercial landlord files a UD action for the amount remaining due and unpaid.

The tenant claims the landlord cannot proceed with a UD hearing since neither the three-day notice nor the landlord’s receipt of the partial rent payment include a nonwaiver of rights provision.

May the landlord proceed with the UD action after receipt of partial rent?

Yes!  The nonwaiver provision in the lease agreement puts the tenant on notice, allowing the landlord to accept rent without waiving enforcement rights. One such right is the right to proceed with a UD action. [Woodman Partners v. Sofa U Love (2001) 94 CA4th 768]

Further, a nonwaiver of rights provision in a three-day notice or partial payment agreement provides the landlord with the same right to proceed with the UD action as though the provision existed in the lease agreement.

On accepting a partial payment of rent after a UD action has been filed, the commercial landlord amends the UD complaint to reflect the partial payment received and the amount remaining due and unpaid by the tenant. [CCP §1161.1(c)]

Get it in writing

Without a written partial payment agreement, tenants might claim the landlord who accepted partial rent:

  • treated acceptance of partial rent as satisfaction of all the rent due;
  • waived their right to continue eviction proceedings; or
  • permanently modified the lease agreement, establishing a semi-monthly rent payment schedule.

When a residential or commercial landlord accepts a partial payment of rent, the evidence provided by a signed partial payment agreement overcomes tenant claims that the landlord waived UD enforcement rights by accepting rent.

Residential partial payment agreement

The partial payment agreement entered into by a tenant and a landlord accepting partial rent memorializes:

  • the landlord’s receipt of partial rent;
  • the amount owed on the deferred portion of the delinquent rent;
  • the tenant’s promise to pay the remaining rent owed on or before a specific date; and
  • notification of the landlord’s right to serve a three-day notice on failure to pay the remaining balance. [See RPI Form 559]

Prevention of disputes 

Consider a residential tenant who informs the landlord they will be unable to pay the full monthly rent before the payment becomes delinquent. The tenant offers to pay part of the rent prior to delinquency and the remainder ten days later.

Since the tenant is creditworthy, has not been seriously delinquent in the past and the landlord wishes to retain the tenant, the residential landlord agrees to accept partial payment from the tenant in exchange for temporarily deferring any eviction activity.

However, to avoid disputes regarding the amount of rent remaining due and when it is to be paid, the residential landlord prepares and the landlord and tenant sign a partial payment agreement formalizing their understanding.

Now consider a residential landlord who serves a three-day notice and then accepts a partial payment of rent before completing the eviction process started by the notice. By accepting a partial payment, the residential landlord understands the three-day notice had been rendered invalid and no longer supports a UD action and eviction.

Thus, when the residential landlord accepts payment of partial rent it is on the condition the tenant enters into a partial payment agreement stating the date the balance owed is due. The partial payment agreement prevents disputes with the tenant about when the balance is due or a three-day notice may be served if the balance is not paid.

Commercial partial payment agreement form 

The Partial Payment Agreement – Commercial –  published by RPI (Realty Publications, Inc.) is used by a commercial landlord or their agent when accepting partial payment of delinquent rent and temporarily deferring any eviction activity, to document the terms for payment of the remainder of the delinquent rent and preserve the right to continue any eviction process underway if the tenant defaults. [See RPI Form 588]

Form 558 includes:

  • the date the agreement is entered into and by whom [See RPI Form 558 §§1.1 – 1.4];
  • the dates the tenant has not paid delinquent rent for [See RPI Form 558 §2];
  • the amount of partial payment on delinquent rent the landlord accepts [See RPI Form 558 §3];
  • the balance of delinquent rent owed, including late charges for delinquency(ies) and deferred rent processing charges [See RPI Form 558 §4];
  • the date the total deferred rent is due and the form in which it will be paid [See RPI Form 558 §5];
  • a statement detailing that if all deferred rent is paid on the due date, the outstanding three-day notice to pay rent or quit is no longer valid [Form RPI 558 §6]; and
  • a clause detailing that if the deferred rent is not paid when due, the landlord reserves the right to:
    • serve the tenant with a three-day notice to pay the remaining balance of the rent due or quit the premises;
    • commence, without further notice, a UD action to evict the tenant from the premises; or
    • continue with the filed UD action to evict the tenant from the premises. [See RPI Form 558 §7]

Residential partial payment agreement form 

The Partial Payment Agreement – Residential – published by RPI is used by a residential landlord or their agent when accepting partial payment of delinquent rent and temporarily deferring any eviction activity, to document the terms for payment of the remainder of the delinquent rent and preserve the right to continue any eviction process underway if the tenant defaults.

Form 559 includes:

  • the date the agreement is entered into, by whom, and the name of the premises [See RPI Form 559 §1];
  • the amount the tenant has not paid in full for the month(s)[See RPI Form 559 §2];
  • the amount the landlord accepts as partial payment on past rent due [See RPI Form 559 §3];
  • the balance of the unpaid rent owed plus late charges for delinquency and deferred rent processing charges [See RPI Form 559 §4];
  • the date the tenant is to pay the total deferred rent on and the method of payment [See RPI Form 559 §5]; and
  • a clause indicating that if the deferred rent is not paid when due, a three-day notice to pay rent or quit may be served at any time. [See RPI Form 559 §6]