Let’s say your tenant signed a lease on September 1, never took possession, and made two monthly payments before stopping. Most commercial leases would give the landlord the right to terminate the lease, evict the tenant and sue immediately for the balance due. Many also give the landlord the option to keep the lease in effect and recover rent and other charges as they become due. If the landlord chooses the latter, and more than three years goes by before suing the tenant for the unpaid rent, does the three-year statute of limitations bar the claim?
In the recent case of Slania Enterprises, Inc. v. Appledore Medical Group, Inc. (May 1, 2018), the New Hampshire Supreme Court ruled the breach of a commercial lease calling for separate, monthly payments constituted an installment contract. As an installment contract, the so-called “installment contract rule” applies, which means the statute of limitations runs against each installment when it becomes due and does not run from the date of the first missed payment. If this rule sounds familiar, it is the same rule that applies to unsecured promissory notes calling for monthly payments. Therefore, in the Slania case, the only claims that were barred by the statute of limitations were payments that were in default (per the terms of the lease) more than years prior to the date the landlord filed suit; however…..
…the tenant also notified the landlord it intended to terminate the lease which, presumably, was the reason it stopped paying rent. The tenant gave that notice more than three years before the landlord filed suit. The tenant argued its actions constituted an “anticipatory breach” and a “material failure to perform” the lease, either or both of which should trump the effect of the installment contract rule, thus barring the landlord’s claim. The Supreme Court noted other states are divided on that question, but also noted the issue was not “fully explored by the trial court,” so it sent the case back to the superior court “for such further proceedings, consistent with this opinion, as the trial court may deem necessary.” Sorry to leave you hanging. Check back with us later!