August 3, 2021

Volume XI, Number 215

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August 03, 2021

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August 02, 2021

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Lease Dispute Series: Covenant of Quiet Enjoyment

In our last installment of the Lease Dispute Series, we talked about tenant payment of real estate taxes.  Today, we’ll talk about the covenant of quiet enjoyment.

North Carolina law implies a number of covenants in leases, one of which is the covenant of quiet enjoyment.  While such covenants may be express, in North Carolina, absent a provision to the contrary, there is an implied covenant that the lessee shall have quiet and peaceable possession of the leased premises during the lease term, including those easements and appurtenances necessary and essential to the enjoyment of the leased premises.  WEBSTER’S REAL ESTATE LAW IN NORTH CAROLINA, §12.11 (2021).  In other words, there are three options with regard to the lease treatment of the covenant of quiet enjoyment: (i) an implied covenant, wherein the lease is silent as to any such covenant, (ii) an express covenant, which can condition, limit, or otherwise outline the extent of the covenant of quiet enjoyment, and (iii) an express disclaiming of any covenant of quiet enjoyment.

We look at three things when addressing a lease dispute involving a covenant of quiet enjoyment: (i) the language of the lease, in terms of the covenant, (ii) who is alleged to have breached the covenant, and (iii) how the covenant was alleged to have been breached.  

The Who of the Covenant of Quiet Enjoyment

As applied to the covenant of quiet enjoyment, North Carolina law only protects against the actions of landlord or its agents.  Let’s get back to Professor Webster:

The covenant of quiet enjoyment affords protection to the lessee only against the wrongful acts of the lessor, someone claiming under the lessor, or one who has a title paramount to the title of the lessor. If the tenant is disturbed in possession by the landlord, or by one claiming under the landlord, or by one who has a superior title to the landlord’s title, the landlord is liable for breach of the covenant of quiet enjoyment. The covenant of quiet enjoyment does not protect the lessee against acts of a stranger wrongdoer who ousts the lessee or interferes with the lessee’s possession after the lessee has taken possession. If a stranger wrongdoer disturbs the lessee’s possession after the lessee has taken possession, the lessee has remedies against the wrongdoer and not against the lessor.

WEBSTER’S REAL ESTATE LAW IN NORTH CAROLINA, §12.11 (2021).  

In Charlotte Eastland Mall, LLC v. Sole Survivor, Inc., 166 N.C. App. 659 (2004), a tenant argued that the landlord – a mall – breached the covenant of quiet enjoyment because criminal incidents were occurring at the mall and the mall failed to provide security at the mall and, in so failing, did not “maintain a safe environment for the corporate defendant and its customers thereby rendering the terms of the lese and any guaranty executed in this matter null and void.”  The Court of Appeals disagreed, reasoning that (i) the lease gave the mall the option – but not the obligation – to provide security and (ii) “it is long-settled [in North Carolina] that “’[t]he covenant of quiet enjoyment ... does not extend to the acts of trespassers and wrongdoers’”.  Accordingly, the Court concluded that the tenant “failed to show that plaintiff breached any duty under the lease”.

The How of the Covenant of Quiet Enjoyment

A breach of the covenant of quiet enjoyment requires a constructive eviction.   In K&S Enterprises v. Kennedy Office Supplies, 135 N.C. App. 260 (1999), the Court of Appeals held that a tenant could not establish a breach of the covenant of quiet enjoyment applicable to a commercial premises because the tenant was not constructively evicted from the premises.  Constructive eviction, the Court of Appeals continued, requires that (i) the landlord’s “breach of duty under the lease renders the premises untenable”, (ii) the untenability “deprives his tenant of ‘that beneficial enjoyment of the premises to which he is entitled under his lease,’ causing his tenant to abandon them”, and (iii)the tenant “abandoned the premises within a reasonable time after the landlord's wrongful act”.

This notion – that a constructive eviction is necessary – is reinforced in a more recent case, Brennan Station 1671, LP v. Borovsky, 262 N.C. App. 1 (2018).  In Brennan Station 1671, LP, the Court of Appeals confirmed that, in fact, a constructive eviction is an element of the breach of the covenant of quiet enjoyment: “Many of the issues before us hinge upon the applicability of the law of constructive eviction ….”

The Takeaway

As most lease disputes will being, read, read, and read again—you need to know and understand your lease terms better than anyone else.  More to the point, as to the covenant of quiet enjoyment, don’t hold your breath with its application in North Carolina to its acts or omissions by third parties – strangers – to the lease.  Also, whatever side you’re on, consider how the breach impacted the tenant and how the tenant reacted; that’s mission critical to the analysis, too.

Copyright © 2021 Womble Bond Dickinson (US) LLP All Rights Reserved.National Law Review, Volume XI, Number 50
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About this Author

Michael C Thelen, Womble Carlyle, Real Estate Litigation Attorney, Entitlement Negotiations Lawyer
Partner

Mike represents myriad clients – from Fortune 500® companies to smaller, privately-owned organizations – in cross sections of business throughout the many stages of federal and state litigation.  From his years of practice in New York and North Carolina, Mike primarily has experience in the areas of land use, local/municipal government law and real estate litigation, having handled zoning, development agreement, land use planning, eminent domain and condemnation, construction, retail and commercial landlord-tenant, partnership dissolution, state law torts, and civil fraud matters, to list...

919-755-2154
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