This article distinguishes the rights held by residential and nonresidential landlords to file or continue an unlawful detainer (UD) action after receipt of partial rent.
Rights of residential and nonresidential landlords
A nonresidential tenant, also called a commercial or industrial tenant, experiences cash flow difficulties due to a business downturn. As a result, the tenant becomes delinquent in 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 3-day notice to pay rent or quit the premises.
Prior to the filing of an unlawful detainer (UD) action, the tenant offers to hand the landlord a partial payment of the delinquent rent. Further, the tenant wants to pay the balance of the delinquent rent by a specific date if the landlord will agree in writing to defer any filing of a UD action, called a partial payment agreement.
The partial payment agreement specifies the amount of deferred rent remaining unpaid, the date for its payment and the consequences of nonpayment — eviction by a UD action without further notice. If the deferred rent is not paid as rescheduled, the nonresidential landlord has the agreed-to right to file a UD action to evict the tenant without repeating the 3-day notice requirement for filing a UD action.
Here, the partial payment agreement has only temporarily delayed the nonresidential landlord from moving forward with the eviction process commenced by the service of the 3-day notice on the tenant.
Under the partial payment agreement, the nonresidential landlord retains his right to proceed, based on the service of the 3-day notice, by filing a UD action to evict the tenant if the deferred payment for the balance of the delinquency is not received as rescheduled.
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 nonresidential tenant seeks to prevent the landlord from proceeding with the UD action, claiming the landlord’s acceptance of the partial rent payment invalidates the 3-day notice since the notice now states an amount of rent which is no longer due.
Can the nonresidential landlord accept a payment of partial rent after serving a 3-day notice and later file a UD action against the tenant without serving another 3-day notice for the remaining unpaid rent?
Yes! A nonresidential landlord can accept a partial payment of rent after serving a 3-day notice and before filing a UD action. Without further notice to the tenant, the nonresidential landlord can commence a UD action and evict the tenant. [Calif. Code of Civil Procedure §1161.1(b)]
Further, on accepting a partial payment of delinquent rent, a nonresidential landlord does not need to agree to a due date for the remaining rent. He also does not need to enter into any agreement regarding his acceptance of the partial payment if the tenant has previously received a reservation of rights from the landlord, called a nonwaiver provision (which appears as a provision in nonresidential leases).
However, the nonresidential landlord who memorializes his acceptance of the partial rent payment and the due date for payment of the unpaid balance eliminates any conflicting claims the tenant may make in a UD action concerning the tenant’s expectations based on the landlord’s acceptance of partial payment of rent.
Residential property distinguished
Consider the same situation involving residential property instead of nonresidential property. As for serving a 3-day notice and later accepting partial payment of the delinquent rent, a huge distinction exists in the separate unlawful detainer rules for residential and nonresidential tenancies.
A residential landlord who accepts any amount of rent from a tenant after serving a 3-day notice waives his right to file a UD action based on that 3-day notice. A residential landlord must re- serve the tenant a notice for the amount now remaining unpaid. [EDC Associates, Ltd. v. Gutierrez (1984) 153 CA3d 167]
Residential vs. nonresidential landlords
Acceptance of a partial payment toward delinquent rent is within the discretion of the landlord. A landlord may be willing 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 tenant is one the landlord wants to retain.
Both residential and nonresidential landlords may accept a partial payment of delinquent rent, then immediately serve the tenant with a 3-day notice demanding payment of the balance due or quit.
However, a landlord could agree in a partial payment agreement not to serve a 3-day notice after receipt of the partial payment of rent on the condition the balance will be received on or before a specified date.
Residential rent paid after notice
If a residential landlord files a UD action and later accepts a partial payment of rent, the UD action cannot go forward to eviction. The reason lies in the different amounts of rent demanded in the notice to pay and the amount actually remaining delinquent at the UD hearing. In residential UD actions the amounts must be the same. This rule does not apply to nonresidential tenancies.
Once the residential landlord accepts a partial payment of delinquent rent, the 3-day notice served on the tenant and used to prove up a UD action no longer states the correct amount which must be paid by the tenant to avoid losing his right to possession.
Any 3-day notice served on a residential tenant overstating the amount of delinquent rent due at the time of trial on the UD action is invalid. The UD action in a residential eviction based on an overstated amount in the 3-day notice must fail. [Jayasinghe v. Lee (1993) 13 CA4th Supp. 33]
Upon acceptance of a partial payment of rent, the residential landlord must serve another 3-day notice demanding payment of the remainder due on unpaid delinquent rent, and, if not paid, file a new UD action.
Nonresidential nonwaiver requirements
However, should a nonresidential landlord file a UD action and later accept a partial payment of rent, he must then provide or have previously provided the tenant with notice that the acceptance of rent does not waive the landlord’s rights, called a nonwaiver of rights provision or reservation of rights. When the tenant receives a nonwaiver of rights on or before the landlord’s acceptance of partial rent, the landlord may continue with the UD action and recover possession of the premises. [CCP §1161.1(c)]
Nonresidential lease agreements include the necessary nonwaiver of rights provision, stating the landlord’s acceptance of partial rent does not constitute a waiver of the landlord’s right to enforce any remaining breach of the lease.
Now consider a nonresidential tenant who defaults on a rent payment under a lease agreement containing a nonwaiver provision. He is served with a 3-day notice to pay or quit, but fails to pay the rent before it expires. The 3-day notice to pay does not contain a provision for nonwaiver of rights on acceptance of rent.
The nonresidential landlord files a UD action. He then accepts a partial payment of rent without entering into any agreements, except to receive the amount paid as rent.
The tenant now claims the landlord cannot proceed with a UD hearing since neither the 3-day notice nor the landlord’s receipt of the partial rent payment include a nonwaiver of rights provision.
Here, the nonresidential landlord may proceed with the UD action after receipt of partial rent. The nonwaiver provision in the lease agreement gives the tenant notice that the landlord’s acceptance of any rent does not waive the landlord’s rights. One such right is the right to proceed with a previously filed UD action. [Woodman Partners v. Sofa U Love (2001) 94 CA4th 766]
A nonwaiver provision in a 3-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 nonresidential landlord amends the UD complaint to reflect the partial payment received and the remaining amount now due from the tenant. [CCP §1161.1(c)]
Get it in writing
Without a written partial payment agreement, the tenant could claim the landlord who accepted partial rent:
- treated acceptance of partial rent as an accord and satisfaction of all the rent due in a purported dispute over the amount of rent actually owed;
- by his conduct waived the right to continue eviction proceedings, sometimes called estoppel; or
- permanently modified the lease agreement, establishing a semi-monthly rent payment schedule.
When a residential or nonresidential landlord accepts a partial payment of rent, the use of the partial payment agreement is evidence that bars the tenant from later claiming the landlord waived valuable rights by accepting rent.
Residential partial payment agreement
The partial payment agreement entered into by a residential landlord and tenant on acceptance of a portion of the rent due memorializes:
- the landlord’s receipt of partial rent;
- the tenant’s promise to pay the remainder of the rent on or before a rescheduled due date; and
- notification of the landlord’s right to serve a 3- day notice on failure to pay the remaining balance.
While the partial payment agreement does state the amount of the deferred portion of the delinquent rent owed by the tenant and the date it is to be paid, the notice is not what is required to establish an unlawful detainer and evict the tenant.
Consider a residential tenant who informs the landlord he will be unable to pay the monthly rent within the grace period after it is due, 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 the partial payment.
However, to avoid disputes regarding the amount of remaining rent due and when it will be paid, the residential landlord prepares and the tenant signs a partial payment agreement formalizing their understanding.
Now consider a residential landlord who serves a 3-day notice and then accepts a partial payment of rent before the notice expires. By accepting a partial payment, the residential landlord has rendered the 3-day notice invalid.
When the rent was accepted the residential landlord required the tenant to enter into a partial payment agreement stating the date the balance owed was due. The partial payment agreement will avoid any claims by the tenant about when the balance is due and when a 3-day notice can be served if the balance is not paid.
Nonresidential partial payment agreement
The eviction rights reserved by a nonwaiver provision allowing a nonresidential landlord to accept partial rent are far less restricted by law than for a residential landlord.
Before service of a 3-day notice to pay rent or quit on a nonresidential tenant who is delinquent in his rent payment, the nonresidential landlord can:
- accept partial payment of rent; and
- then or later serve a 3-day notice, or agree not to serve a 3- day notice unless the remainder of the rent is not paid as rescheduled.
When a 3-day notice has been served on a nonresidential tenant and the landlord later accepts a partial payment of rent, the partial payment agreement they enter into to acknowledge receipt of partial rent contains:
- the due date for payment of the delinquent rent remaining unpaid; and
- notice of the nonresidential landlord’s right to file a UD action on nonpayment.
More importantly, a nonresidential landlord who files a UD action and later accepts a partial payment of rent under a partial payment agreement notifies the tenant that the landlord has not waived his right to continue the UD action and recover possession under the existing UD action in spite of the payment of rent. As a variation, the nonresidential landlord could agree to reinstate the tenant’s right to possession if the remainder of the delinquent rent is paid prior to the UD hearing date.
However, no agreement is necessary on acceptance of partial rent from a nonresidential tenant to preserve the landlord’s rights. The landlord can accept partial payment and immediately proceed with his next step in the eviction process — service of a 3-day notice, filing of the UD action or the UD hearing — if a nonwaiver provision is in a prior document, such as the lease agreement.