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Commercial Landlord Not Liable to Holdover Tenant for Damages on the Leased Premises

When a commercial lease tenant experiences the joy of a sewer line backup, which causes raw sewage to flow from all of the sinks on the premises and contaminates the tenant’s business equipment, it is not shocking for the tenant to seek recourse against the landlord.

But what if the tenant is a “holdover tenant,” who remains on the premises even though the lease has been terminated and the tenant has stopped paying rent?

A recently published opinion from California’s Second Appellate District — Multani v. Knight — examines the landlord/tenant dynamic in this situation.

Facts: lease terminates, tenant holds over, sewage line backs up

Evelyn Knight owned commercial property in Long Beach.  Salima Multani, a doctor, entered into a 5-year lease for the premises in 1993.  Multani ran her medical clinic on the premises, where she stored medical equipment, supplies, and patient files.

The parties signed a second five-year lease in 1998, and when that lease expired in 2003 Multani continued paying the agreed rent, which was accepted by Knight.  At that point, Multani became a month-to-month tenant under the same terms as the expired lease.

In July 2011, Multani experienced health problems.  She stopped working at the clinic, and stopped paying rent to Knight.  In December 2011, Knight issued a three-day notice to pay rent or quit.  Multani failed to respond.  Knight then filed an unlawful detainer action, and obtained judgment in her favor.  Multani was evicted from the premises on May 17, 2012.

Shortly after Knight filed the unlawful detainer action but before Multani’s eviction, the sewer line servicing the premises backed up, causing raw sewage to flow from all of the sinks, contaminating Multani’s medical equipment, supplies, and patient files, rendering them unusable.

Multani sued Knight for a variety of claims based on the damage caused by the sewage leak.

Trial court’s judgment: landlord wins

The trial court granted summary adjudication to Knight on most of the claims, and a jury returned a verdict in favor of Knight on the lone remaining claim.

In ruling for Knight, the trial court held that Multani was illegally in possession of the premises as of the date Knight filed the unlawful detainer action, and therefore had no rights that would support her claims against Knight.

Multani appealed.

Court of Appeal’s opinion: judgment affirmed

The Court of Appeal affirmed the judgment in favor of Knight.  In its opinion, the court focused on the “rights of a non-rent-paying month-to-month tenant.”

The court held that Multani became a “tenant at sufferance” (aka holdover tenant) no later than when Knight filed her unlawful detainer action (and possibly earlier, such as when Multani stopped paying rent).  At that point, Multani had only the right of “naked possession” — i.e., the right not to be forcibly evicted without legal process.  The court rejected Multani’s assertion that she retained “all legal rights” of a tenant until she was evicted following the conclusion of the unlawful detainer action.

Given Multani’s lack of rights under the lease due to her holdover tenant status, and the absence of evidence supporting her claims, the court ruled in favor of Knight.  Most of Multani’s claims, such as nuisance or breach of the covenant of quiet enjoyment, were based on property rights arising from the lease, which had been terminated.

Lesson

According to the Multani opinion, a holdover tenant under a commercial lease has only a right of “naked possession,” and the tenant no longer has property rights arising from the terminated lease.  The holdover tenant cannot hold the landlord liable for damages to the premises.

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