28 N.E.3d 296
Ind. Ct. App.2015Background
- Norris Avenue Professional Building Partnership (Norris) leased property to Coordinated Health beginning May 1, 2002, under a 2-year initial term with two successive 5-year option terms; each option required lessee to give written notice at least 60 days before term end to exercise the option.
- Coordinated Health failed to give the 60-day written notice for the first option but remained in possession and paid rent at the higher amounts specified for the first option term.
- Coordinated Health likewise failed to give the 60-day written notice for the second option, but for a time paid rent consistent with the second option’s escalations; it later gave notice it would leave April 30, 2011, surrendered the premises, and paid rent through that date.
- Norris sued for breach, seeking rent for May 1, 2011–April 30, 2014 (the remainder of the second option term).
- The trial court entered judgment for Coordinated Health on stipulated facts; Norris appealed, and the Court of Appeals reviewed de novo because the case involved only a paper record and stipulated facts.
Issues
| Issue | Plaintiff's Argument (Norris) | Defendant's Argument (Coordinated Health) | Held |
|---|---|---|---|
| Whether Coordinated Health exercised the option terms despite missing the 60-day notice requirement | Coordinated Health manifested intent to exercise both options by paying the higher, option-term rents; Norris accepted those payments, waiving strict notice | The 60-day written notice was a material condition precedent; failure to give it made Coordinated Health a holdover tenant and prevented option exercise | Court held Coordinated Health exercised the options: payment of option-term rents was an affirmative act of election and Norris waived the notice requirement by accepting those payments |
| Whether mere holding over and payment of rent is sufficient to exercise an option when lease requires notice | Norris: holding over plus materially higher option rent constituted an affirmative act beyond mere holding over | Coordinated Health: absent the written notice, mere holding over cannot create the option | Court: if rent under option terms differed from initial term, paying the higher option rent can constitute the required affirmative act; mere holding over paying the same rent would not suffice |
| Whether the notice requirement can be waived by the lessor | Norris: Norris could waive the condition precedent and did so by accepting option-term rent payments | Coordinated Health: contends strict compliance required; waiver inappropriate | Court: condition precedent for lessor’s benefit can be waived by lessor through conduct; Norris’ acceptance of higher rents amounted to waiver |
| Remedy and disposition | Norris sought judgment for unpaid rent through April 30, 2014 | Coordinated Health sought judgment for no liability | Court reversed trial judgment for Coordinated Health and remanded with instructions to enter judgment for Norris as appropriate |
Key Cases Cited
- Carsten v. Eickhoff, 323 N.E.2d 664 (Ind. Ct. App. 1975) (holding notice required for option terms is a condition precedent but payment of higher option rent can distinguish an affirmative election to extend)
- Powers v. City of Lafayette, 622 N.E.2d 1311 (Ind. Ct. App. 1993) (condition precedent may be waived by lessor’s conduct; late notice can be accepted as waiver)
- Harrison v. Thomas, 761 N.E.2d 816 (Ind. 2002) (a condition precedent’s performance may be waived by party conduct)
- City of Bloomington v. Kuruzovich, 517 N.E.2d 408 (Ind. Ct. App. 1987) (a holdover tenant is generally subject to the same lease terms as the original term)
- Munster v. Groce, 829 N.E.2d 52 (Ind. Ct. App. 2005) (de novo review appropriate where only paper record is presented)
- Houser v. State, 678 N.E.2d 95 (Ind. 1997) (appellate courts need not defer when reviewing only the paper record)