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					                                                 GEORGIA

                                      Sutherland Asbill & Brennan LLP
                                               James B. Jordan
                                            R. Robinson Plowden



I.       LANDLORD RIGHTS AND REMEDIES

         A.        Notice Requirements as Conditions to Exercise of Landlord’s Remedies

                   1.         Notice of Dispossessory Proceeding

                   Unless required by the lease, a landlord is not required to provide notice, as such,
                   prior to filing a dispossessory proceeding. However, the landlord must demand
                   possession of the premises prior to commencing a dispossessory proceeding. Ga.
                   Code Ann. § 44-7-50(a) (Supp. 2000). The demand for possession does not need
                   to contain any special language as long as the landlord clearly demands that the
                   tenant relinquish possession of the premises. Stephens v. Hous. Auth., 293 S.E.2d
                   53, 53 (Ga. Ct. App. 1982) (“[Ga. Code Ann. § 44-7-50] does not require that this
                   demand be in any certain form . . . .”). The demand for possession may be written
                   or oral. Sandifer v. Long Investors, Inc., 440 S.E.2d 479, 482 (Ga. Ct. App.
                   1994). Nevertheless, for evidentiary purposes, it is advisable that the demand for
                   possession be given in writing. If the landlord seeks to dispossess the tenant due
                   to holding over (including holding over beyond the term which has been
                   terminated by the landlord due to the tenant’s default), the landlord must give the
                   demand for possession upon or after termination of the lease but prior to
                   commencement of the dispossessory proceeding. Trumpet v. Brown, 450 S.E.2d
                   316, 317 (Ga. Ct. App. 1994). If the landlord seeks to dispossess the tenant due to
                   nonpayment of rent, the landlord must give the demand for possession after the
                   due date of the rent but prior to commencement of the dispossessory proceeding.
                   Metro Mgmt. Co. v. Parker, 278 S.E.2d 643, 647 (Ga. 1981). Dispossessory
                   proceedings are discussed more fully in Section I.K below.

                   2.         Notice in Other Contexts

                   Unless required by the lease, the landlord need not give the tenant notice prior to
                   filing a suit for collection of rent. Helmken v. Flood, 75 S.E.2d 3, 4 (Ga. 1912).
                   Nor is the landlord required to make any demand prior to instituting distress
                   proceedings unless required by the lease. Alexander v. Holmes, 68 S.E.2d 242,
                   245 (Ga. Ct. App. 1951). Distress proceedings are discussed more fully in
                   Section I.L below.




Sutherland Asbill & Brennan LLP                                                                          1
                   3.         Recommended Course of Action

                   Landlords often give tenants written notice prior to exercising a remedy, even
                   where no such notice is required. One advantage to giving such notice is that it
                   provides a convenient time for giving the notice required by Georgia statute as a
                   condition precedent to recovering attorney’s fees to the extent permitted by the
                   lease. Recovery of attorney’s fees is discussed more fully in Section I.B.3 below.

         B.        Limitations on the Scope of Landlord’s Remedies for Tenant’s Failure to Pay
                   Rent

                   1.         Recovery of Rent After Eviction

                   “Generally, when a landlord evicts a tenant and takes possession of the premises,
                   the lease is terminated and the right to claim rent which accrues after eviction is
                   extinguished.” Peterson v. P.C. Towers, L.P., 426 S.E.2d 243, 245 (Ga. Ct. App.
                   1992). However, “the ‘parties to a lease agreement may contract in advance to
                   hold the lessee liable for rent even after an eviction, deducting therefrom only the
                   amounts recovered by the lessor from reletting the premises . . . [if such an
                   agreement is] premised on the existence of an explicit and detailed provision in
                   the lease which clearly and unequivocally expressed the parties’ intention to hold
                   the lessee responsible for after-accrued rent even should an eviction take place.’”
                   Id. at 243 (quoting Bentley-Kessinger v. Jones, 367 S.E.2d 317 (Ga. Ct. App.
                   1988)). Accordingly, unless the lease expressly and clearly provides to the
                   contrary, upon the issuance of a writ of possession, the tenant’s obligation to pay
                   rent shall cease.

                   2.         Recovery of Interest

                   Generally speaking, sums owed under contracts that do not specify an interest rate
                   will bear interest at seven percent per annum from and after the due date. Ga.
                   Code. Ann. § 44-7-16 (1991) (providing that unpaid rent shall bear interest); Ga.
                   Code. Ann. § 7-4-2(a) (1997) (setting the legal rate of interest). Under Georgia
                   usury limitations, if the lease does establish an interest rate applicable to late rent
                   payments and the late rent installment is $3,000.00 or less, the interest rate shall
                   not exceed sixteen percent per annum simple interest. Ga. Code Ann. § 7-4-
                   2(a)(2) (1997). While there is no civil usury limitation as to sums in excess of
                   $3,000.00, the criminal usury provisions of Georgia law limit interest to five
                   percent per month. Ga. Code Ann. § 7-4-18(a) (Supp. 2001).

                   3.         Recovery of Legal Fees

                              (a)    Where the lease does not contain an obligation to pay fees




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                        If the lease does not obligate the tenant to pay legal fees, the landlord typically
                        cannot recover them. “The expenses of litigation generally shall not be
                        allowed as part of the damages.” Ga. Code Ann. § 13-6-11 (Supp. 2001).
                        However, in unusual circumstances where the defendant “has acted in bad
                        faith, has been stubbornly litigious, or has caused the plaintiff unnecessary
                        trouble and expense, the jury may allow [recovery of legal fees and
                        expenses].” Ga. Code Ann. § 13-6-11 (Supp. 2001).

                              (b)   Where the lease contains an obligation to pay fees

                                    (1)    Procedures for Recovery

                                    If a lease contains an express obligation to pay legal fees, Ga. Code
                                    Ann. § 13-1-11 establishes the procedures for recovery. Georgia
                                    Color Farms, Inc. v. K.K.L. Ltd. P’ship, 507 S.E.2d 817, 820 (Ga.
                                    Ct. App. 1998) (stating that a lease is “evidence of indebtedness”
                                    under Ga. Code Ann. § 13-1-11 and therefore falls within the
                                    ambit of the statute). Under Section 13-1-11(a)(3), the conditions
                                    precedent to recovery of contractual attorneys’ fees are: (1) the
                                    contract must include an obligation to pay attorneys’ fees; (2) the
                                    debt (e.g., rent obligation) must have matured; (3) written notice
                                    must be given to the debtor informing him that he has ten days
                                    from receipt of the notice to pay the debt in order to avoid
                                    attorneys’ fees; (4) the ten day period must expire without payment
                                    of the debt (and any interest thereon) in full; and (5) the debt must
                                    be collected by or through an attorney-at-law. Ga. Code Ann. §
                                    13-1-11(a)(3) (1982).

                                    (2)    Statutory Attorney’s Fees

                                    If the landlord complies with Section 13-1-11 and the lease
                                    provides that the tenant will pay attorneys’ fees equal to a specified
                                    percentage of the amount owed, the percentage may not exceed
                                    fifteen percent. Ga. Code Ann. § 13-1-11(a)(1) (1982). If the
                                    landlord complies with Section 13-1-11 and the lease provides that
                                    the tenant will pay “reasonable attorneys’ fees” without specifying
                                    a percentage, the landlord is entitled to collect fifteen percent of
                                    the first $500.00 owed and ten percent of any sums over $500.00.
                                    Ga. Code Ann. § 13-1-11(a)(2) (1982).

                                    (3)    Prevailing Party Attorney’s Fees

                                    Georgia courts have enforced lease provisions that entitle the
                                    “prevailing party” in an action to receive its “reasonable attorneys’
                                    fees actually incurred.” See Georgia Color Farms, Inc. v. K.K.L.


Sutherland Asbill & Brennan LLP                                                                          3
                                    Ltd. P’ship, 507 S.E.2d 817, 820 (Ga. Ct. App. 1998). We are not
                                    aware of any reported cases that analyze whether a party must
                                    comply with Section 13-1-11 to enforce such “prevailing party”
                                    language. Indeed, applying Section 13-1-11 to such a situation
                                    poses a practical problem about when to give the ten-day notice
                                    described in clause (4) of subparagraph (b)(1). The ten-day notice
                                    required by Section 13-1-11 contemplates a situation in which one
                                    party has a non-contingent obligation to pay a sum to another
                                    party. Thus, the ten-day notice serves to allow time to pay the
                                    non-contingent obligation without being obligated to pay legal
                                    fees. In contrast, the obligation to pay legal fees pursuant to
                                    “prevailing party” provisions typically is contingent upon a court
                                    entering judgment against one party. As a result, sending the ten-
                                    day notice before a judgment is entered would appear to be nothing
                                    more than a self-serving demand to admit all of the demanding
                                    party’s assertions in its pleadings; and sending the notice after
                                    judgment is entered would amount to a demand for a party to
                                    comply with the judgment. Both options appear awkward.
                                    Nevertheless, because we are not aware of any reported Georgia
                                    case addressing this issue, we recommend that a landlord comply
                                    with Section 13-1-11 in connection with “prevailing party”
                                    provisions.

                                    (4)    Recommended Course of Action: Agreement to Avoid
                                           Statutory Formula

                                    If the landlord desires to avoid the statutory formula set forth in
                                    Section 13-1-11(a)(1) and (3), the custom in Georgia is to require
                                    that the tenant pay “reasonable attorneys’ fees actually incurred” or
                                    words of similar import. Where a lease refers to “reasonable
                                    attorney’s fees actually incurred”, or similar words, it is believed
                                    that the party benefiting from such language will be entitled to
                                    collect the actual attorneys’ fees incurred so long as they are
                                    “reasonable,” regardless of whether the fees are higher or lower
                                    than the amount yielded by the application of the formula set forth
                                    in Section 13-1-11(a)(1) and (2). See, Rodgers v. First Union Nat’l
                                    Bank, 470 S.E.2d 246, 250 (Ga. Ct. App. 1996).

                   4.         Recovery of Consequential Damages

                          We are not aware of any reported Georgia cases that distinguish between
                   recovery of consequential damages in leases and recovery of consequential
                   damages in general contracts not governed by the Uniform Commercial Code.
                   Two statutes control the award of consequential damages in contracts. Section
                   13-6-2 provides that damages that are recoverable from a breach of contract must


Sutherland Asbill & Brennan LLP                                                                        4
                   “arise naturally and according to the usual course of things from such breach and
                   such as the parties contemplated, when the contract was made, as the probable
                   result of its breach.” The other statute provides that “[r]emote or consequential
                   damages are not recoverable unless they can be traced solely to the breach of the
                   contract or unless they are capable of exact computation, such as the profits which
                   are the immediate fruit of the contract, and are independent of any collateral
                   enterprise entered into in contemplation of the contract.” Ga. Code Ann. § 13-6-8
                   (1982). Thus, speculative damages are not permitted. Grossberg v. Judson
                   Gilmore Assocs., Inc., 395 S.E.2d 592, 594 (Ga. Ct. App. 1990). (holding that
                   lost profits were too speculative to permit recovery). However, “while mere
                   speculation cannot support any damage award, all that is required is evidence
                   from which damages can be established with reasonable certainty, and difficulty
                   in fixing exact amounts should not preclude recovery.” CRS Sirrine, Inc. v.
                   Dravo Corp., 464 S.E.2d 897, 900 (Ct. App. 1995).

         C.        Limitations on the Scope of Landlord’s Remedies for Tenant’s Defaults Other
                   Than Failure to Pay Rent

                   Other than the provisions discussed in Sections I.B.2, I.B.3 and I.B.4 above with
                   respect to attorney’s fees, interest and consequential damages, we are not aware of
                   any special restrictions on the scope of a landlord’s remedies for tenant defaults
                   other than a failure to pay rent. A non-monetary default by a tenant usually gives
                   the landlord the right to pursue the same remedies as are applicable in the case of
                   a failure to pay rent.

         D.        Duty to Mitigate

                   1.         No General Duty

                   Generally, a landlord is not required to mitigate damages caused by a tenant’s
                   lease default. Lamb v. Decatur Fed. Sav. & Loan Ass’n, 411 S.E.2d 527, 530
                   (Ga. Ct. App. 1991).

                   2.         Exceptions to General Rule

                   There are two important exceptions to this general rule. First, the parties to a
                   lease may contractually require mitigation. Second, if the lease is terminated,
                   “the landlord is required to make reasonable efforts to re-lease the premises and
                   mitigate his damages.” Georgia Color Farms v. K.K.L., Ltd. P’ship, 507 S.E.2d
                   817, 818 n.1 (Ga. Ct. App. 1998). This second exception presumably does not
                   apply where the landlord terminates the tenant’s right of possession only without
                   terminating the lease.




Sutherland Asbill & Brennan LLP                                                                        5
                   3.         Recommended Course of Action

                   Because the landlord has a duty to mitigate damages once the lease terminates, the
                   landlord should carefully consider its election of remedies (i.e., consider
                   terminating the tenant’s right of possession only) and its response to a tenant
                   abandoning the premises. If the landlord accepts surrender of the premises, the
                   lease terminates as a matter of Georgia law. Lamb v. Decatur Fed. Sav. & Loan
                   Ass’n, 411 S.E.2d 527, 530 (Ga. Ct. App. 1991). Therefore, if the landlord
                   desires to avoid an obligation to mitigate its damages, the landlord should
                   consider leaving the lease in force by not accepting surrender.

                   The Georgia Court of Appeals has held that “’[t]here must be either an express
                   agreement to the surrender of possession on the part of the tenant, or such
                   circumstances as compel that the landlord consented to retake possession of his
                   property.’” Vaswani v. Wohletz, 396 S.E.2d 593, 595 (Ga. Ct. App. 1990)
                   (quoting Jenkins v. Smith, 88 S.E.2d 533 (Ga. Ct. App. 1955)). It is not clear
                   what constitutes acceptance of surrender under Georgia law because that
                   determination depends upon the surrounding facts and circumstances. A landlord
                   may wish to consider including language in the lease addressing surrender (e.g.,
                   language to the effect that there shall not be an acceptance of surrender in the
                   absence of a written agreement signed by a duly appointed agent of the landlord).

         E.        Landlord’s Ability to Recover Rent

                   1.         Past Due Rent

                   A landlord may recover delinquent rent from a tenant by filing a civil action based
                   on breach of contract rather than resorting to a special statutory procedure and
                   seeking to regain possession of the premises. See, Maolud v. Keller, 278 S.E.2d
                   80, 81 (Ga. Ct. App. 1981). In an eviction proceeding, the landlord may also
                   recover a judgment for all past due rents, Ga. Code Ann. § 44-7-55(a) (Supp.
                   2001), provided the tenant is personally served in connection with the
                   dispossessory proceeding (see Section I.K.3(d) below) or the landlord uses “tack
                   and mail” service (see Section I.K.3(d) below) and the tenant answers in response
                   to the “tack and mail” service. See Hous. Auth. v. Hudson, 296 S.E.2d 558, 559-
                   60 (Ga. 1982). However, if the landlord uses “tack and mail” service and the
                   tenant does not answer, the landlord is not entitled to a personal judgment for
                   unpaid rents or damages. Hous. Auth. v. Hudson, 290 S.E.2d 558, 560 (Ga.
                   1982).

                   2.         Rent Acceleration Provisions

                              (a)    Limited Ability to Accelerate




Sutherland Asbill & Brennan LLP                                                                     6
                              Upon a tenant default, subject to the limitations described in this section, a
                              landlord may accelerate rent for the balance of the lease term, but only if
                              the lease contains an express acceleration clause. See, e.g., Kasum
                              Communications, Inc. v. CPI N. Druid Co., 217 S.E.2d 492, 493 (Ga. Ct.
                              App. 1975). Georgia courts view rent acceleration clauses as liquidated
                              damages provisions. See, e.g., Peterson v. P.C. Towers, L.P., 426 S.E.2d
                              243, 245 (Ga. Ct. App. 1992). Therefore, to be enforceable, a rent
                              acceleration clause must satisfy the three-part test set forth in Southeastern
                              Land Fund, Inc. v. Real Estate World, Inc., 227 S.E.2d 340 (Ga. 1976).
                              Peterson, 426 S.E.2d at 246. “First, the injury caused by the breach must
                              be difficult or impossible of accurate estimation; second, the parties must
                              intend to provide for damages rather than for a penalty; and third, the sum
                              stipulated must be a reasonable pre-estimate of the probable loss.”
                              Southeastern Land Fund, 227 S.E.2d at 343. In Peterson, the court did not
                              enforce the rent acceleration clause because the clause purported to
                              provide the landlord possession of the premises and a lump sum award of
                              future rent (reduced to present value) without any attempt to reasonable
                              pre-estimate the amount of the landlord’s loss by taking into account the
                              future rental value of the premises and the likelihood of reletting.
                              Peterson, 426 S.E.2d at 246.

                              (b)    Caution Relating to Enforceability

                              We caution landlords about the potential unenforceability of rent
                              acceleration clauses. We believe that any rent acceleration provision
                              which allows the landlord to collect the entire future rent without reducing
                              such sum to present value or without deducting from such sum the present
                              value of the future rental value of the premises during the remaining term
                              of the lease is of dubious enforceability. See Mullis v. Shaheen, 456
                              S.E.2d 764, 765 (Ga. Ct. App. 1995). Therefore, we recommend that
                              landlords draft their rent acceleration provisions to (i) include the
                              liquidated damage type language referenced in Southeastern Land Fund
                              above; (ii) reduce the accelerated rent to present value; and (iii) deduct
                              from the present value of the accelerated rent the present value of the
                              reasonable rental value for the premises for the remainder of the lease
                              term. This contractual approach to rent acceleration is consistent with
                              reported Georgia case authority as to damages referenced in Section I.E.3
                              below. See Piggly Wiggly S., Inc. v. Eastgate Assocs., Inc., 392 S.E.2d
                              337, 339 (Ga. Ct. App. 1990) (“[T]he proper measure of damages to be
                              applied is the excess of the rent reserved under the lease agreement over
                              the reasonable rental value of the premises at the time of the breach.”).

                   3.         Landlord’s Right to Collect Future Rent

                              (a)    No General Right to Recover


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                              If the landlord evicts the tenant or terminates the lease, the landlord’s right
                              to future rent is normally extinguished. Mullis v. Shaheen, 456 S.E.2d
                              764, 765 (Ga. Ct. App. 1995).

                              (b)    Exceptions to General Rule

                              However, “the parties to a lease agreement may contract in advance to
                              hold the lessee liable for rent even after an eviction.” Id. To do so,
                              however, the landlord must rely upon “an explicit and detailed provision
                              in the lease which clearly and unequivocally” expresses the parties intent.
                              Bentley-Kessinger, Inc. v. Jones, 367 S.E.2d 317, 318 (Ga. Ct. App. 1988)
                              (containing an example of language that is not explicit and detailed);
                              Hardin v. Macon Mall, 315 S.E.2d 4, 6 (Ga. Ct. App. 1984) (containing an
                              example of language that was enforceable).

                                     (1)     Examples When Landlord Evicts

                                     Georgia courts have endorsed two types of lease provisions that
                                     permit the recovery of future rents when the landlord evicts the
                                     tenant. In Hardin, the court enforced a lease provision that
                                     permitted the landlord to recover each month the deficiency
                                     between (i) the amount due that month; and (ii) the amount
                                     collected for that month. Hardin, 315 S.E.2d at 6. The Mullis
                                     court enforced the second type of lease provision which permitted
                                     the landlord to accelerate “the worth at the time of termination of
                                     the difference between the rent under the lease and that for which
                                     the premises were relet, if any, for the remainder of the lease
                                     term.” Mullis, 456 S.E.2d at 765. This lease provision is
                                     consistent with the type of lease provision described in Section
                                     I.E.2(b) above.

                                     (2)     Examples When Tenant Has Abandoned Premises

                                     In cases where the landlord does not need to evict the tenant
                                     because the tenant has abandoned the premises, the landlord has
                                     two methods to recover future rent. The landlord may accept the
                                     abandonment and sue at once for “the excess of the rent reserved
                                     under the lease agreement over the reasonable rental value of the
                                     premises at the time of the breach.” Piggly Wiggly S., Inc. v.
                                     Eastgate Assocs., Inc., 392 S.E.2d 337, 339 (Ga. Ct. App. 1990).
                                     Alternatively, the landlord may elect not to accept the
                                     abandonment and to treat the lease as remaining in full force and
                                     effect, in which event the landlord may (i) permit the premises to
                                     remain vacant while collecting the agreed upon rent from the


Sutherland Asbill & Brennan LLP                                                                            8
                                     original tenant, or (ii) obtain another tenant while holding the
                                     original tenant liable for any deficiency that may occur. Crolley v.
                                     Crow-Childress-Mobley #3, 379 S.E.2d 202, 204 (Ga. Ct. App.
                                     1989); Love v. McDevitt, 152 S.E.2d 705, 706 (Ga. Ct. App.
                                     1966).

                   4.         Rent Accruing Subsequent to Filing

                   In a statutory eviction proceeding, the landlord is entitled to all rent that is due.
                   Ga. Code Ann. § 44-7-50(a) (Supp. 2001). In a civil action to recover rents,
                   however, “[e]ach installment under a [lease] contract constitutes a different cause
                   of action on which an action can be brought, even though all are provided in the
                   same contract.” Dwyer v. Anand, 436 S.E.2d 532, 533 (Ga. Ct. App. 1993). “In
                   order to recover rents that become due after commencement of an action seeking
                   rents that are already past due, a plaintiff must amend his original complaint under
                   [Ga. Code Ann.] § 9-11-15(a), supplement his pleadings under [Ga. Code Ann.] §
                   9-11-15(d), or try the additional issues with the express or implied consent of the
                   other party in accordance with [Ga. Code Ann.] § 9-11-15(b).” Id. In the
                   alternative, once the issue of liability has been established judicially, the landlord
                   should be entitled to initiate successive suits in the future to obtain the actual
                   amount of damages suffered by the landlord on account of such prior default.

         F.        Landlord’s Ability to Seek Specific Performance

                   In general, a landlord may seek specific performance of a lease. See, e.g., Smith
                   v. Top Dollar Stores, Inc., 198 S.E.2d 690 (Ga. Ct. App. 1973). We note,
                   however, that while we are not aware of any reported Georgia cases addressing
                   the specific performance of tenant opening or operating covenants in leases,
                   Georgia courts may be reluctant to require specific performance of such
                   covenants because of the difficulties posed by judicial supervision or other
                   reasons.

                   There do not appear to be any special rules governing the application of specific
                   performance to a lease. Instead, the statutes and case law pertaining generally to
                   specific performance would appear to apply. Ga. Code Ann. § 23-2-130 provides
                   that “[s]pecific performance of a contract, if within the power of the party, will be
                   decreed, generally, whenever damages recoverable at law would not be an
                   adequate compensation for nonperformance.” Other standards imposed by equity
                   also apply. For example, a party seeking specific performance must show
                   substantial compliance with his part of the agreement. Pope v. Cole, 156 S.E.2d
                   36 (Ga. 1967).




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          G.        Restrictions on Landlord’s Ability to Recover Default Interest

                    Default interest is subject to Georgia’s usury statute. Under that statute, if the
                    lease does establish an interest rate applicable to late rent payments and the late
                    rent installment is $3,000.00 or less, the default interest rate shall not exceed
                    sixteen percent per annum simple interest. Ga. Code Ann. § 7-4-2(a)(2) (1997).
                    While there is no civil usury limitation as to sums in excess of $3,000.00, the
                    criminal usury provisions of Georgia law limit interest to five percent per month.
                    Ga. Code Ann. § 7-4-18(a) (Supp. 2001). (See Section I.B.2 above)

                    Generally speaking, sums owed under contracts that do not specify an interest rate
                    will bear interest at seven percent per annum from and after the due date. Ga.
                    Code. Ann. § 44-7-16 (1991) (providing that unpaid rent shall bear interest); Ga.
                    Code. Ann. § 7-4-2(a) (1997) (setting the legal rate of interest).

          H.        Restrictions on Landlord’s Ability to Recover Late Charges

                    Georgia law permits a landlord to assess a late charge against a tenant failing to
                    pay any sum in a timely manner so long as such late charge satisfies the three-part
                    Southeastern Land Fund test described in Section I.E.2(a) above so as to avoid
                    being deemed an unenforceable penalty. Oami v. Delk Interchange, Ltd., 388
                    S.E.2d 706, 707-08 (Ga. Ct. App. 1989) (enforcing late charge of $10.00 per day);
                    Krupp Realty Co. v. Joel, 309 S.E.2d 641, 642-43 (Ga. Ct. App. 1983) (enforcing
                    a flat $50.00 late charge). In both Oami and Delk, the court of appeals applied the
                    Southeastern Land Fund test and determined that the applicable late charges were
                    not unenforceable penalties because they represented a reasonable pre-estimate of
                    the additional administrative, bookkeeping and clerical expenses resulting from
                    the tenant’s late payment. Oami, 309 S.E.2d at 708; Krupp, 309 S.E.2d at 643.
                    To increase the likelihood that a landlord’s reasonable late charge will satisfy the
                    Southeastern Land Fund test, we recommend that the landlord insert language into
                    the lease that provides that (1) landlord and tenant agree that such late charge is
                    not intended as a penalty but is instead intended to compensate landlord for
                    additional administrative charges and other damages incurred by landlord on
                    account of such late payment; (2) landlord and tenant agree that the actual
                    damages to be suffered by landlord in such event shall be difficult, if not
                    impossible to ascertain; and (3) such late charge is a reasonable estimate of such
                    charges and damages.

          I.        Limitations on Landlord’s Application of Tenant’s Security Deposit

                    For commercial leases, there are no special restrictions applicable to security
                    deposits. A commercial landlord is not required to keep a security deposit in a
                    special account. The landlord may commingle the security deposit with the
                    landlord’s other funds. The landlord also is not required to pay interest on the




Sutherland Asbill & Brennan LLP                                                                        10
                    security deposit. See, William J. Dawkins, Georgia Landlord and Tenant Breach
                    and Remedies § 3-1, at 37-38 (2d ed. 1990).

          J.        Landlord’s Ability to Engage in Self-Help Evictions

                    1.        Lease May Permit Self-Help Evictions

                    If a commercial lease provides that the landlord may reenter and take possession
                    of the premises without recourse to the Georgia summary eviction statute (Ga.
                    Code Ann. § 44-7-50 et seq.), the landlord may do so if the landlord can
                    accomplish the eviction without a “breach of the peace.” Rucker v. Wynn, 441
                    S.E.2d 417, 420 (Ga. Ct. App. 1994). Any other eviction must occur pursuant to
                    the summary eviction statute discussed below. Swift Loan & Fin. Co. v. Duncan,
                    394 S.E.2d 356, 358 (Ga. Ct. App. 1990).

                    2.        Caution Against Self-Help Evictions

                    We caution landlords about exercising self-help evictions because of the potential
                    liability that doing so creates. If the landlord fails to proceed judicially, the
                    landlord’s self-help actions will not be based upon a judicial acknowledgment of
                    the tenant’s default, and the landlord may be exposed to material damages if the
                    tenant has a technical or substantive defense to the default. Moreover, as a
                    practical matter, a landlord may be viewed adversely by a court if the landlord is
                    thought to have responded unreasonably or cavalierly or in a manner which is
                    disproportionate to the default in question. A landlord that exercises non-judicial
                    remedies can be subject to an action for trespass and other actionable torts, “even
                    if the tenant is holding over beyond his term, is in arrears in his rent, and has
                    received legal notice to vacate.” Swift, 394 S.E.2d at 358. In Swift the court
                    affirmed the trial court’s ruling that the landlord was liable for trespass, abusive
                    litigation and punitive damages where the landlord maliciously locked out the
                    tenant without using the summary eviction statute. Even in Rucker, a case where
                    the court upheld a landlord’s self-help eviction, we note that the trial court did not
                    dismiss the tenant’s claim for conversion of personal property arising out of the
                    landlord locking out the tenant. Rucker, 441 S.E.2d at 418-19. As the conversion
                    claim did not reach the court of appeals, the disposition of the conversion claim is
                    unknown.

          K.        Georgia Summary Eviction Statute

                    Georgia’s summary eviction proceedings are in Ga. Code Ann. § 44-7-50 et seq.

                    1.        Landlord-Tenant Relationship

                              (a)    Condition Precedent to Summary Eviction




Sutherland Asbill & Brennan LLP                                                                         11
                              In order for a landlord to commence proceedings under Ga. Code Ann. §
                              44-7-50 et seq., a landlord-tenant relationship must exist. Good Ol’ Days
                              Commissary, Inc. v. Longcrier Family Ltd. P’ship I, 522 S.E.2d 249, 251
                              (Ga. Ct. App. 1999). For such a relationship to exist, it is not necessary
                              that the landlord be the true owner of the property. It is sufficient for the
                              landlord to have an enforceable lease contract with the tenant. Bridges v.
                              City of Moultrie, 437 S.E.2d 368, 370 (Ga. Ct. App. 1993). Thus, a
                              landlord-tenant relationship would exist if a party with a leasehold interest
                              in certain property subleased the property to another party.

                              (b)    Usufruct versus Estate for Years

                              One unusual aspect of Georgia law is the concept of the usufruct, which is
                              “the right simply to possess and enjoy the use” of real estate. Ga. Code
                              Ann. § 44-7-1 (1991). Section 44-7-1 provides that “[t]he relationship of
                              landlord and tenant is created when the owner of real estate” grants a
                              usufruct. Id. That section also states that when the owner grants a
                              usufruct, “no estate passes out of the landlord.” Id. Similarly, Section 44-
                              6-101 provides that “[a]s applied to realty, an estate for years does not
                              involve the relationship of landlord and tenant, in which relationship the
                              tenant has no estate but merely has a right of use.” Ga. Code Ann. § 44-6-
                              101 (1991). It is customary for commercial leases in Georgia to be
                              denominated as usufructs.

                              We are not aware of any reported Georgia cases that apply this statute to
                              state that a landlord-tenant relationship does not exist for purposes of the
                              Georgia summary eviction statute if an owner grants a leasehold estate as
                              opposed to a usufruct. Instead, we believe that the dispossession remedy
                              set forth in Section 44-7-50 et seq. should be available both to the landlord
                              under the usufruct and the grantor under an estate for years. See William
                              J. Dawkins, Georgia Landlord and Tenant Breach and Remedies § 5-1, at
                              52-53 (2d ed. 1990).

                              Nevertheless, out of an abundance of caution, one may wish to consider
                              inserting into a lease creating an estate for years rather than a usufruct
                              language that provides that a landlord-tenant relationship exists for
                              purposes of, and the landlord may exercise the remedies set forth in,
                              Section 44-7-50 et seq.

                    2.        Grounds for Dispossession

                              Under the summary eviction statute, there are three grounds for
                              dispossession: (a) the tenant is holding over; (b) the tenant failed to pay
                              rent when due; or (c) the landlord desires possession of the premises held
                              by a tenant at will or a tenant at sufferance. The first and third grounds


Sutherland Asbill & Brennan LLP                                                                            12
                              overlap because a tenant that is holding over is a tenant at sufferance and,
                              under certain circumstances, may become a tenant at will. From a
                              landlord’s perspective, the grounds for dispossession raise three key
                              issues.

                              (a)    Termination Clauses and Holding Over

                              First, a tenant becomes a tenant holding over when the lease term expires
                              by its terms as well as when the landlord terminates the lease because of a
                              tenant default or another lease provision. Georgia courts have enforced
                              lease provisions that permit a landlord to terminate a lease upon a tenant
                              breach. See, e.g., RCH Corp. v. Southland Inv. Corp., 178 S.E.2d 766,
                              767 (Ga. Ct. App. 1970). However, such termination clauses must be
                              specific. Pritchett v. King, 194 S.E. 44 (Ga. Ct. App. 1937).

                              (b)    Sixty Day Notice to Tenant At Will

                              Second, Georgia law requires a landlord to give sixty days notice before
                              commencing eviction proceedings against a tenant at will, but does not
                              require any notice before a landlord commences such proceedings against
                              a tenant at sufferance. Ga. Code Ann. § 44-7-7 (1991). Absent an
                              agreement to the contrary, a tenant will be a tenant at sufferance if it holds
                              over without the acquiescence of the landlord. Carruth v. Carruth, 48
                              S.E.2d 387, 390 (Ga. Ct. App. 1948). However, “[i]t takes very little to
                              convert a tenancy at sufferance into a tenancy at will. Receipt of rent,
                              demand for rent, or anything that indicates the permission of the landlord
                              for the tenant to remain in possession will have this effect.” Willis v.
                              Harrell, 45 S.E. 794, 795-96 (Ga. 1903). We recommend that landlords
                              who desire possession promptly demand possession while refusing to
                              accept rent or otherwise recognize the tenant’s right even to possess the
                              premises temporarily.

                              (c)    Independent Grounds for Dispossession

                              Third, a landlord should recognize that each of the grounds for
                              dispossession are independent. Thus, even if a tenant holding over has
                              become a tenant at will, the landlord may commence eviction proceedings
                              against the tenant without the necessity of terminating the tenancy by
                              giving the statutory sixty day notice if the tenant has also failed to pay
                              rent. However, if the landlord desires to repossess the premises and the
                              tenant is a tenant at sufferance, we would advise a landlord to proceed
                              based upon the first or third grounds for dispossession in order to prevent
                              a tenant from tendering payment of rent pursuant to Ga. Code Ann. § 44-
                              7-52, which constitutes a complete defense to an dispossessory action
                              based upon nonpayment of rent. Ga. Code Ann. § 44-7-52 (Supp. 2001).


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                              Note, however, that the landlord may draft the lease to provide that the
                              tenant waives the right to tender payment pursuant to Ga. Code Ann. § 44-
                              7-52. Hardwick, Cook & Co. v. 3379 Peachtree, Ltd., 363 S.E.2d 31, 33
                              (Ga. Ct. App. 1987).

                    3.        Dispossession Procedures

                              (a)    Demand for Possession

                              The landlord’s first step in the summary eviction pursuant to Ga. Code
                              Ann. § 44-7-50 et seq. is making a demand for possession. The demand
                              need not contain any special language, as long as it is clear. Stephens v.
                              Hous. Auth., 293 S.E.2d 53, 53 (Ga. Ct. App. 1982) (“[Ga. Code Ann. §
                              44-7-50] does not require that this demand be in any certain form . . . .”)
                              If the landlord seeks to dispossess the tenant due to holding over, the
                              landlord must give the demand notice upon or after termination of the
                              lease but prior to commencement of the dispossessory proceeding.
                              Trumpet v. Brown, 450 S.E.2d 316, 317 (Ga. Ct. App. 1994). If the
                              landlord seeks to dispossess the tenant due to nonpayment of rent, landlord
                              must give the demand notice after the due date of the rent but prior to
                              commencement of the dispossessory proceeding. Metro Mgmt. Co. v.
                              Parker, 278 S.E.2d 643, 647 (Ga. 1981). The demand may be written or
                              oral. Sandifer v. Long Investors, Inc., 440 S.E.2d 479, 482 (Ga. Ct. App.
                              1994). However, for reasons of proof, it is always advisable that the
                              notice be written.

                              (b)    Landlord’s Affidavit

                              The second step in the summary eviction process is for the landlord, his
                              agent or his attorney to make a sworn affidavit under oath to the facts. Ga.
                              Code Ann. § 44-7-50(a) (Supp. 2001). The affidavit should clearly state
                              the grounds for dispossession. If there are multiple grounds for
                              dispossession (e.g., the tenant is holding over and has failed to pay rent),
                              the affidavit should state them each “separately and positively” to be
                              effective. Taylor v. Carver State Bank, 341 S.E.2d 502, 503 (Ga. Ct. App.
                              1986). The affidavit should not state the multiple grounds using “and/or”
                              language, as that has been found to be too ambiguous to be effective. Id.
                              The affidavit should also name the tenant with particularity, Russell v.
                              O’Donnell, 208 S.E.2d 107, 108-09 (Ga. Ct. App. 1974) (stating that a
                              trade name is adequate as long as it imports a legal entity and the name is
                              corrected prior to judgment), describe the premises with enough
                              specificity that the sheriff is able to identify the property, Taylor, 341
                              S.E.2d at 503, state that the tenant has refused the landlord’s demand for
                              possession, allege any amounts due (including rent, interest and attorney’s
                              fees) and pray for judgment in the amount so alleged. See, Ga. Code Ann.


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                              § 44-7-53(a) (Supp. 2001) (stating that if the tenant fails to answer
                              landlord’s summons, the landlord is entitled to judgment by default for all
                              rents due “as if ever item and paragraph in the affidavit” were supported
                              by proper evidence). Typically, each court will have its own form
                              Landlord’s Affidavit.

                              (c)    Summons

                              After the landlord makes the affidavit, the judge of the superior or state
                              court where the action arises, or the magistrate before whom the affidavit
                              is made, must issue a summons to the sheriff or his deputy or any lawful
                              constable of the county where the land lies. Ga. Code Ann. § 44-7-51(a)
                              (1991). The summons must command the tenant to answer either orally or
                              in writing within seven days from the date of the actual service unless the
                              seventh day is a Saturday, a Sunday or a legal holiday, in which case the
                              answer may be made on the next day that is not a Saturday, a Sunday or a
                              legal holiday. Ga. Code Ann. § 44-7-51(b) (1991). Typically, each court
                              will have its own form Summons.

                              (d)    Service of Affidavit and Summons

                              Pursuant to O.C.G.A § 44-7-51(a), the sheriff, deputy or lawful constable
                              must serve the affidavit and the summons on the tenant. That statute
                              provides that if the sheriff, deputy or constable is unable to serve the
                              defendant personally, service may be had by delivering the summons and
                              the affidavit to any person who is sui juris residing on the premises or,
                              after reasonable effort no such person is found residing on the premises,
                              by posting a copy of the summons and the affidavit on the door of the
                              premises and mailing a copy by first-class mail to the defendant’s last
                              known address (so-called “tack and mail” service). Ga. Code Ann. § 44-
                              7-51(a) (1991). In a commercial real estate case, the court of appeals has
                              stated “tack and mail” service is permissible only where doing so is
                              “reasonably calculated, under the circumstances, to afford notice”. Davis
                              v. Hybrid Indus., Inc., 236 S.E.2d 854, 855 (Ga. Ct. App. 1977). In Davis,
                              the court determined that “tack and mail” service was not adequate
                              because the commercial tenant “did not reside at the premises, and it had a
                              different corporate address as well as a registered agent for service of
                              process.” Id. We note that if a landlord chooses to use “tack and mail”
                              service, the court has only quasi-in-rem jurisdiction, Pelletier v.
                              Northbrook Garden Apartments, 210 S.E.2d 722, 724 (Ga. 1974). As a
                              result, if the tenant fails to answer the “tack and mail” service, the court
                              may not render a judgment for rent due. Hous. Auth. v. Hudson, 296
                              S.E.2d 558, 560 (Ga. 1982).




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                              (e)   Answer and Trial

                                    (1) If Tenant Fails to Answer

                                    If the tenant fails to answer within the seven day period specified
                                    in the summons, the landlord is entitled to (a) a writ of possession
                                    instanter, and (b) a default judgment for all rents due as if each
                                    allegation in the affidavit were supported by proper evidence. Ga.
                                    Code Ann. § 44-7-53(a) (Supp. 2001). However, if the affidavit
                                    failed to demand or state the amount of rent due, the default
                                    judgment should be for a writ of possession and not a monetary
                                    judgment. Leverette v. Moran, 266 S.E.2d 574, 576 (Ga. Ct. App.
                                    1980).

                                    (2) If Tenant Answers

                                    If the tenant answers within the seven day period, the matter
                                    proceeds to trial. Pending the final outcome of the litigation, if the
                                    tenant desires to remain in possession of the premises, Ga. Code
                                    Ann. § 44-7-53(b) requires the tenant to pay rent into the registry
                                    of the court pursuant to Ga. Code Ann. § 44-7-54 “at the time of
                                    his answer.” However, cases construing Ga. Code Ann. § 44-7-54
                                    indicate that the tenant must pay rent into the registry where the
                                    issue of the right of possession cannot be finally determined within
                                    two weeks from the date of service of the summons and affidavit.
                                    See Lamb v. Hous. Auth., 247 S.E.2d 597, 599 (Ga. Ct. App.
                                    1978).

                                    (3) Practical Considerations

                                    While there are no statutory procedures that apply to expedite trial
                                    once the trial commences, typically a proceeding under the
                                    summary eviction statute occurs on a faster track than ordinary
                                    lawsuits. In addition, the summary eviction statute does not place
                                    any limitations on the size of a judgment that the court may render.

          L.        Landlord’s Lien

                    1.        Generally

                    A landlord in Georgia has no common law lien or right to retain a tenant’s
                    property. Messmore v. Roth, 366 S.E.2d 318, 320 (Ga. Ct. App. 1988). Ga. Code
                    Ann. § 44-14-341 gives a landlord a general lien on the tenant’s property that is
                    subject to levy and sale. The method for enforcing this lien is a distress
                    proceeding pursuant to Ga. Code Ann. § 44-7-70 et seq. This lien is inferior to


Sutherland Asbill & Brennan LLP                                                                         16
                    liens for taxes and to the general and special liens of laborers, and ranks with
                    other liens according to date. The relative priority of the landlord’s lien vis-a-vis
                    all other liens is determined by reference to the dates of the respective liens so
                    that earlier liens have priority over subsequent liens. For this purpose, the date of
                    this lien is the “time of levying a distress warrant.” Ga. Code Ann. § 44-14-342
                    (1982). Thus, unlike landlord liens in other jurisdictions, the landlord’s lien does
                    not benefit from any “super priority” over, for example, financing liens.

                    2.        Landlord-Tenant Relationship

                    The distraint statute is similar to the summary eviction statute because a landlord-
                    tenant relationship must exist before the statute applies. Arnold v. Selman, 62
                    S.E.2d 919, 920 (Ga. Ct. App. 1951). Issues pertaining to the landlord-tenant
                    relationship are discussed above in Section I.K.1 in connection with the summary
                    eviction statute.

                    As in the dispossession context, we are not aware of any reported Georgia cases
                    that apply Ga. Code Ann. § 44-7-1 (1991) or Ga. Code Ann. § 44-6-101 (1991) to
                    state that a landlord-tenant relationship does not exist for purposes of the Georgia
                    summary distraint statute if an owner grants a leasehold estate as opposed to a
                    usufruct. Instead, we believe that the summary distraint remedy set forth in Ga.
                    Code Ann. § 44-7-70 et seq. is available both to the landlord under the usufruct
                    and the grantor under an estate for years. See William J. Dawkins, Georgia
                    Landlord and Tenant Breach and Remedies § 6-2, at 144 (2d ed. 1990).

                    3.        Grounds for Distraint

                    At first blush, the two statutes setting forth the grounds for distraint appear
                    inconsistent. Ga. Code Ann. § 44-7-70 provides that the landlord “shall have the
                    power to distrain for rent as soon as the same is due if the tenant is seeking to
                    remove his property from the premises.” In contrast, Ga. Code Ann. § 44-7-71
                    provides that the landlord may apply for a distress warrant “[w]hen rent is due or
                    the tenant is seeking to remove his property” (emphasis added). The Georgia
                    Court of Appeals has explained and reconciled these two statutes in D. Jack Davis
                    Corp. v. Karp, 333 S.E.2d 685, 687 n.1 (Ga. Ct. App. 1985). In that case, the
                    court stated that “Section [44-7-70] gives the landlord the power to distrain, i.e.,
                    levy or seize the tenant’s property.” In contrast, Section 44-7-71 is procedural in
                    nature and “merely allows the landlord to begin the distraint process, by
                    application, even if the rent is not yet due but the tenant is seeking to remove his
                    property, so that by the time the rent is due and not paid, the levy can proceed.”
                    D. Jack Davis Corp. v. Karp, 333 S.E.2d 685, 687 n.1 (Ga. Ct. App. 1985). In
                    other words, a landlord may commence a distraint proceeding under Section 44-7-
                    71 when the tenant either fails to pay rent when due or seeks to remove property
                    from the premises. But, the landlord may not complete the distraint process and
                    cause the local governmental authorities (e.g., the sheriff) to effect the levy


Sutherland Asbill & Brennan LLP                                                                        17
                    against the tenant’s property until the tenant has both failed to pay rent when due
                    and is seeking to remove the property from the premises. In this way, the two
                    statutes work together: while in inverse order in the statute, Section 44-7-71
                    provides the procedural basis for distraint proceedings (but provides no
                    substantive basis for enforcing the lien) and Section 44-7-70 provides the power
                    to enforce the lien established pursuant to the procedures set forth in Section 44-
                    7-71.

                    4.        Distraint Procedure

                              (1)    Landlord’s Affidavit

                              The first step in a distress proceeding is for the landlord, his agent or his
                              attorney to make a sworn affidavit under oath as to the facts. Ga. Code
                              Ann. § 44-7-71 (1991). The affidavit should clearly state the grounds for
                              issuance (i.e., that rent is due or that the tenant is seeking to remove his
                              property from the premises). The affidavit should also name the tenant
                              with particularity, see Russell v. O’Donnell, 208 S.E.2d 107, 108-09 (Ga.
                              Ct. App. 1974) (stating that a trade name in a dispossessory proceeding is
                              adequate as long as it imports a legal entity and the name is corrected prior
                              to judgment), describe the premises with enough specificity that the sheriff
                              is able to identify the property, see Jackson v. Oliphant, 76 S.E.2d 625,
                              625 (Ga. Ct. App. 1953), and state either that the tenant resides in the
                              county where application is made or the tenant has property in that county.
                              See Kimball Co. v. Rodgers, 93 S.E. 32, 32 (Ga. Ct. App. 1917). The
                              statute does not specifically require that the affidavit state the amount of
                              rent due. However, case law interpreting the predecessor statute holds that
                              the amount should be so stated. Cornwell v. Leverette, 56 S.E. 300, 301
                              (Ga. 1906). In addition, Ga. Code Ann. § 44-7-74 permits a default
                              judgment “as if every item and paragraph in the affidavit . . . were
                              supported by proper evidence.” Therefore, we recommend that the
                              affidavit set forth the amounts due. Typically, each court will have its
                              own form of Landlord’s Affidavit.

                              (2)    Summons

                              After the landlord makes the affidavit, the judge of the superior or state
                              court where the action arises, or the magistrate before whom the affidavit
                              is made, must issue a summons to the sheriff, deputy or marshal of the
                              county where the tenant resides or where his property may be found. Ga.
                              Code Ann. § 44-7-72 (1991). The summons must command the tenant to
                              appear at a hearing on a day certain not less than five nor more than seven
                              days from the date of the actual service. Ga. Code Ann. § 44-7-72 (1991).
                              Typically, each court will have its own form of Summons.




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                              (3)    Service of Affidavit and Summons

                              Pursuant to Ga. Code Ann. § 44-7-72, the sheriff, deputy or marshal must
                              serve the affidavit and the summons on the tenant. That statute provides
                              that if the sheriff, deputy or marshal is unable to serve the defendant
                              personally, service may be had by delivering the summons and the
                              affidavit to any person who is sui juris residing on the premises or, after
                              reasonable effort no such person is found residing on the premises. Ga.
                              Code Ann. § 44-7-72 (1991). Unlike the eviction statute, the distraint
                              statute does not permit “tack and mail” service. Once the summons is
                              served, Ga. Code Ann. § 44-7-75 prohibits the tenant from transferring,
                              conveying, removing or concealing his property without either posting a
                              bond pursuant to Ga. Code Ann. § 44-7-76 or complying with Ga. Code
                              Ann. § 44-7-75(a) and (b), which require the tenant to pay rent in the
                              registry of the court. Ga. Code Ann. § 44-7-75(d) (1991).

                              (4)    Answer and Trial

                                     (a)     If Tenant Fails to Answer

                                     If the tenant fails to answer within the specified period specified in
                                     the summons, and the requirements of Section 44-7-70 (See
                                     Section I.L.3 above) have been met, the landlord is entitled to (a) a
                                     distress warrant, and (b) a default judgment for all rents due as if
                                     each allegation in the affidavit were supported by proper evidence.
                                     Ga. Code Ann. § 44-7-74 (1991). As stated above, while a
                                     landlord may file a distress proceeding under Ga. Code Ann. § 44-
                                     7-71 when rent is due or when the tenant seeks to remove its
                                     property, Section 44-7-70 provides for levy only when rent is due
                                     and the tenant is seeking to remove its personal property.

                                     (b)     If Tenant Answers

                                     If the tenant answers within the specified period, the matter
                                     proceeds to trial. Pending the final outcome of the litigation, if the
                                     tenant desires to remain in possession of the property subject to the
                                     distress proceeding, Ga. Code Ann. § 44-7-75 requires the tenant
                                     to pay into the registry of the court at the time of the tenant’s
                                     answer “all rent admittedly owed prior to the issuance of the
                                     summons.” Ga. Code Ann. § 44-7-75(a) (1991). If that amount is
                                     disputed, the court may determine the amount to be paid into the
                                     registry. Ga. Code Ann. § 44-7-75(b) (1991). The tenant must
                                     also pay into the registry all rent coming due after the date of the
                                     issuance of the summons. Id. If that amount is disputed, either
                                     party can present a written lease to establish the amount to be paid


Sutherland Asbill & Brennan LLP                                                                          19
                                     and, absent such a written agreement, the court shall require the
                                     amount to be paid to be equal to the last rental payment paid by the
                                     tenant and accepted by the landlord. Id. If the landlord is also
                                     seeking a dispossessory warrant (discussed above), the sums paid
                                     pursuant to Ga. Code Ann. § 44-7-54 will satisfy the requirements
                                     of Ga. Code Ann. § 44-7-75 relating to payment into the registry.
                                     Ga. Code Ann. § 44-7-75(c) (1991)

                              (5)    Tender of Payment

                              Ga. Code Ann. § 44-7-73 states that “the tenant shall be allowed to tender
                              to landlord, within seven days of the day the tenant was served with the
                              summons . . . all rents allegedly owed plus the cost of the distress
                              warrant.” Ga. Code Ann. § 44-7-73 (1991). Such a tender is a complete
                              defense to the distress proceeding. Ga. Code Ann. § 44-7-73. This statute
                              does not clearly state that such tender also obviates the need to file an
                              answer. Therefore, a cautious tenant will also file an answer alleging such
                              tender as its defense. Presumably, a landlord may draft the lease to
                              provide that the tenant waives the right to tender payment pursuant to Ga.
                              Code Ann. § 44-7-73. See Hardwick, Cook & Co. v. 3379 Peachtree,
                              Ltd., 363 S.E.2d 31, 33 (Ga. Ct. App. 1987) (permitting waiver of right to
                              tender in a dispossession case).

                              (6)    Not Widely Used


                              The statutory distress proceeding is not widely used in Georgia. William
                              J. Dawkins, Georgia Landlord and Tenant Breach and Remedies § 6-1, at
                              141 (2d ed. 1990). It is not commonly used for at least two reasons. First,
                              the distress proceeding does not create a “super priority” lien that is
                              superior to, for example, liens for financing. Accordingly, if the tenant's
                              personal property is encumbered, the distress proceeding will be of little
                              assistance to a landlord. Second, unlike an earlier version of the statute,
                              the current distraint statute affords the tenant notice and a hearing before
                              the landlord can seize or levy against the tenant's property. Id.

          M.        Special Rules for Landlords and Tenants in Context of UCC Consensual Lien

                    There are no special rules.

          N.        Election of Remedies

                    State requirements for election of remedies should not affect the landlord’s ability
                    to pursue remedies against a defaulting tenant. “The Civil Practice Act provides
                    that a claimant may pursue any number of consistent or inconsistent remedies


Sutherland Asbill & Brennan LLP                                                                         20
                    without the necessity of having to make an election.” Eric James Hertz & Mark
                    G. Bergethon, Georgia Law of Damages § 12-3 at 181 (2000); See Ga. Code Ann.
                    § 9-11-18.




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II.       TENANT RIGHTS AND REMEDIES

          A.        Warranty of Quiet Enjoyment

                    1.        Implied in Leases

                    “A covenant for quiet enjoyment of the premises is necessarily implied in every
                    lease . . . .” Dwyer v. McCoy, 512 S.E.2d 70, 73 (Ga. Ct. App. 1999) (quoting
                    Adair v. Allen, 89 S.E. 1099 (Ga. Ct. App. 1916)). We are not aware of any
                    reported Georgia cases that address whether this implied covenant can be waived
                    expressly in the lease. However, since Georgia courts recognize the freedom of
                    contract principle and generally interpret contractual provisions literally,
                    particularly in commercial transactions, Vaswani v. Whohletz, 396 S.E.2d 593,
                    594 (Ga. Ct. App. 1990), we see no reason why a Georgia court would not
                    enforce such a waiver of the warranty of quiet enjoyment. In addition, we would
                    expect that a court would enforce a lease provision expressly limiting the
                    warranty of quiet enjoyment (e.g., a "limited" warranty of quiet enjoyment where
                    the landlord limits the warranty to claims of parties claiming by, through or under
                    landlord).

                    2.        Breach of Warranty of Quiet Enjoyment

                    Georgia courts have recognized a breach of the covenant of quiet enjoyment in
                    two types of situations.

                              (a)    Paramount Title

                              First, a court may find a breach of the covenant if the tenant is evicted or
                              cannot enjoy the full length of its lease term because the landlord did not
                              have good title to the property or did not have the authority to lease the
                              property for the term set forth in the lease. Dwyer v. McCoy, 512 S.E.2d
                              70, 73 (Ga. Ct. App. 1999). In Dwyer, the landlord breached the covenant
                              because (i) the landlord held only a life estate in the property and died
                              before the lease term expired, (ii) the tenant did not have actual knowledge
                              that the landlord had only a life estate, and (iii) the actual owner of the
                              property permitted the tenant to remain on a month-to-month basis, but
                              would not allow the tenant to enjoy the remaining years of its ten-year
                              lease. Id.

                              (b)    Constructive Eviction

                              The second situation in which Georgia courts have recognized a breach of
                              the covenant of quiet enjoyment is where the tenant is constructively
                              evicted by the landlord’s actions. See Smith v. Hightower, 55 S.E.2d 872,


Sutherland Asbill & Brennan LLP                                                                         22
                              875 (Ga. Ct. App. 1949). Constructive eviction is discussed in Section
                              II.B below.

                              (c)    Special Circumstances Where Covenant is Not Breached

                                     (1)     Act of Third Parties

                                     The implied covenant of quiet enjoyment does not protect the
                                     tenant against the acts of third parties that disturb the tenant, unless
                                     it can be shown that the landlord authorized or is responsible for
                                     the disturbance. See Parker v. Munn Sign & Advertising Co., 29
                                     Ga. App. 420, 420 (1922).

                                     (2)     Other Disturbances or Disruptions of Tenant’s Use and
                                             Occupancy

                                     Georgia cases do not clearly state whether a breach of the covenant
                                     of quiet enjoyment will exist if the landlord disturbs the tenant’s
                                     occupancy, but the disturbance is not so material as to result in
                                     failure of landlord's title or constructive eviction. 19 Encyclopedia
                                     of Georgia Law § 40 at 277 (1993). One case suggests that
                                     constructive eviction is not required because the court determined
                                     that a landlord had breached the implied covenant by maliciously
                                     removing the door to the premises, without analyzing whether the
                                     tenant was constructively evicted. See Albert Properties, Inc. v.
                                     Watkins, 237 S.E.2d 670, 671-72 (Ga. Ct. App. 1977). However,
                                     another case indicates that constructive eviction may be required.
                                     See Hardwick, Cook & Co. v. 3379 Peachtree, Ltd., 363 S.E.2d 31,
                                     34 (Ga. Ct. App. 1987) (upholding a court’s grant of summary
                                     judgment against a tenant alleging a breach of the implied
                                     covenant of quiet enjoyment in part because “it is uncontroverted
                                     that [the tenant] continued its occupancy and its business during
                                     the renovation activity of landlord and nothing in the record
                                     indicates a constructive eviction”). We are not aware of any
                                     reported Georgia cases addressing whether matters interfering with
                                     tenant's use of its premises such as disruptive noise or odors
                                     constitute a breach of the warranty of quiet enjoyment.

                              (d)    Tenant’s Remedies for Breach of the Covenant of Quiet
                                     Enjoyment

                              If a landlord breaches the covenant of quiet enjoyment, the tenant may
                              seek to enjoin the landlord’s acts. Eric James Hertz & Mark G.
                              Bergethon, Georgia Law of Damages § 23-1 at 181 (2000). Alternatively,
                              the breach may be the basis for a suit for monetary damages or, if the


Sutherland Asbill & Brennan LLP                                                                            23
                              landlord’s actions amount to “an intentional disregard” of the tenant’s
                              rights, punitive damages. Albert Properties, Inc. v. Watkins, 237 S.E.2d
                              670, 671-72 (Ga. Ct. App. 1977)

          B.        Constructive Eviction

                    1.        Tenant’s Remedy

                    Constructive eviction, when present, serves to rescind the lease and relieve the
                    tenant of the obligation to pay rent. Piano & Organ Ctr., Inc. v. Southland
                    Bonded Warehouse, Inc., 228 S.E.2d 615, 617 (Ga. Ct. App. 1976); Johnson v.
                    Watkins, 26 Ga. App. 759, 759 (1921).

                    2.        Constructive Eviction Due to Failure to Repair

                    The classic constructive eviction situation is comprised of three elements (a) the
                    landlord as a consequence of his failure to keep the rented premises repaired,
                    allows the premises to become an unfit place for the tenant, who is physically
                    occupying the premises, to carry on the business for which the premises was
                    rented, (b) the premises cannot be restored to a fit condition by ordinary repairs
                    which can be made without unreasonable interruption of the tenant’s business,
                    and (c) the tenant vacates the premises. Piano & Organ Ctr., Inc. v. Southland
                    Bonded Warehouse, Inc., 228 S.E.2d 615, 617 (Ga. Ct. App. 1976). An example
                    of this type of constructive eviction involves a landlord that made no attempt to
                    repair a leak in an exterior wall, which resulted in the subject premises flooding
                    with every rainfall. Id.

                    3.        Constructive Evictions Due to Other Causes

                    “Constructive eviction can occur under circumstances other than when the
                    premises have been allowed to deteriorate to the point of unfitness.” Sunamerica
                    Fin., Inc. v. 260 Peachtree St., Inc., 415 S.E.2d 677, 681 (Ga. Ct. App. 1992),
                    rev’d in part on other grounds, Atlanta Mkt. Ctr. Mgmt. v. McLane, 503 S.E.2d
                    284 (Ga. 1998). For this constructive eviction to occur in this manner, the tenant
                    must vacate the premises as a result of the landlord acting or failing to act in a
                    “grave and permanent” manner with the intention of depriving the tenant of the
                    enjoyment of the premises. Id. An example of this type of breach involves a
                    tenant that vacated the premises because the landlord failed to cause an elevator
                    critical to a tenant’s operations to comply with applicable codes in a timely
                    manner despite receiving warnings that governmental authorities would lock all
                    non-compliant elevators. Magnolia Warehouses v. Morton Realty Co., 117
                    S.E.2d 552, 553-54 (Ga. Ct. App. 1960).




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                    4.            Special Issues Relating to Constructive Eviction

                              (a)       Must Result from Landlord’s Acts

                              Constructive eviction can exist only if it results from the landlord’s acts.
                              “[A]cts of another tenant . . . cannot amount to a constructive eviction.”
                              Rains Inv. Co. v. George Roe & Assocs, Inc., 231 S.E.2d 460, 461 (Ga.
                              Ct. App. 1976).

                              (b)       Must Not Be Merely Uncomfortable

                              In order for constructive eviction to apply, “there must be some grave act
                              of a permanent character done by the landlord.” Alston v. Georgia Credit
                              Counsel, Inc., 232 S.E.2d 134, 135 (Ga. Ct. App. 1976). It is not
                              sufficient for the premises to be merely “uncomfortable.” Sunamerica
                              Fin., Inc., v. 260 Peachtree St., Inc., 415 S.E.2d 677, 681 (Ga. Ct. App.
                              1992), rev’d in part on other grounds, Atlanta Mkt. Ctr. Mgmt. v. McLane,
                              503 S.E.2d 284 (Ga. 1998). Accordingly, the Georgia Court of Appeals
                              reversed a trial court’s finding that a tenant was constructively evicted
                              where the air conditioning serving the premises was inoperable for three
                              days and, at other times, the air conditioning and heating did not meet the
                              tenant’s comfort standards. Alston, 232 S.E.2d at 135.

          C.        Tenant’s Offset Rights

                    1.        Repair and Deduct

                    Absent lease language to the contrary, a tenant does not have a right of offset,
                    except in certain limited circumstances referred to as “repair and deduct.” The
                    repair and deduct remedy applies where the landlord has failed to make a required
                    repair after a reasonable time has elapsed after notice. Borochoff Props., Inc. v.
                    Creative Printing Enters., Inc., 210 S.E.2d 809, 810 (Ga. 1974). What constitutes
                    a “reasonable time,” of course, depends on all surrounding facts and
                    circumstances. Once the tenant makes the repairs, the tenant may offset the
                    reasonable cost of the repairs against rent. Johns v. Gibson, 4 S.E.2d 480, 481
                    (Ga. Ct. App. 1939). As a practical matter, the offset may be accomplished by
                    tendering to the landlord repair receipts instead of rent. William J. Dawkins,
                    Georgia Landlord and Tenant Breach and Remedies § 2-7, at 17 (2d ed. 1990).

                    2.        Offset May Be Waived

                    The Georgia Court of Appeals has held that the parties to a commercial lease may
                    waive the repair and deduct remedy. Hardwick, Cook & Co. v. 3379 Peachtree,
                    Ltd., 363 S.E.2d 31, 33 (Ga. Ct. App. 1987). In Hardwick the court enforced
                    general language in the lease that provided that rent “shall be paid without


Sutherland Asbill & Brennan LLP                                                                              25
                    deduction or offset.” Id. As a result, the tenant in Hardwick could not deduct
                    amounts allegedly owed by the landlord to the tenant. Id.

          D.        Tenant’s Remedies for Landlord’s Default

                    In addition to the “repair and deduct” remedy discussed above, a tenant may sue a
                    landlord. The lawsuit might be a contract action, or, in some instances, a tort
                    action or equitable relief (subject to the limitations described below).

                    1.        Contract Damages

                    A tenant may bring an action for breach of contract against a defaulting landlord.
                    See, e.g., Atlanta Baggage & Cab Co. v. Loftin, 76 S.E.2d 92 (Ga. Ct. App.
                    1953). “Damages recoverable for a breach of contract are such as arise naturally
                    and according to the usual course of things from such breach and such as the
                    parties contemplated, when the contract was made, as the probable result of its
                    breach.” Ga. Code Ann. § 13-6-2 (1982). “The measure of damages for the
                    breach of a lease by the lessor is the difference between the rental price agreed
                    upon and the actual value of the premises at the time of the breach.” Strickland v.
                    Flournoy, 97 S.E.2d 638, 638 (Ga. Ct. App. 1957). Punitive damages are not
                    recoverable for mere breach of contract. Bennett v. Associated Food Stores, 165
                    S.E.2d 581, 585 (Ga. Ct. App. 1968).

                    2.        Tort Damages

                    In theory, under limited circumstances, a tenant might also bring a tort action
                    against a defaulting landlord. “Generally, a mere breach of a valid contract
                    amounting to no more than a failure to perform in accordance with its terms does
                    not constitute a tort . . . .” Mauldin v. Sheffer, 150 S.E.2d 150, 153 (Ga. Ct. App.
                    1966). However, “if a contract imposes a legal duty upon a party thereto, which
                    duty exists apart from the specific obligation of the contract, the neglect of that
                    duty is a tort founded upon a contract.” Id. Absent a lease provision to the
                    contrary, Georgia law obligates the landlord to maintain the premises. Ga. Code
                    Ann. § 44-7-13 (1991). Therefore, if a landlord fails to maintain the premises and
                    the lease does not shift this maintenance obligation to the tenant, a tenant might
                    be able to sue the landlord in tort. Damages in a tort action “may be either
                    general or special, direct or consequential.” Ga. Code Ann. § 51-12-1 (2000).
                    Unlike a tenant suing for contract damages, a tenant that sues in tort might be able
                    to recover punitive damages, see Stroud v. Elias, 275 S.E.2d 46, 48 (Ga. 1981), if
                    there is “clear and convincing evidence” that the landlord’s actions constituted
                    “willful misconduct, malice, fraud, wantonness, oppression, or that entire want of
                    care which would raise the presumption of conscious indifference to the
                    consequences.” Ga. Code Ann. § 51-12-5.1(b) (2000).




Sutherland Asbill & Brennan LLP                                                                       26
                    3.        Equitable Relief

                    A tenant may be able to obtain an injunction against a landlord that is physically
                    interfering with the tenant’s right of possession. Eric James Hertz & Mark G.
                    Bergethon, Georgia Law of Damages § 23-1 at 364 (2000). In addition, if the
                    landlord has caused or permitted a nuisance on the premises, the tenant may
                    obtain injunctive relief. Id. Ga. Code Ann. § 41-1-1 et seq. sets forth the
                    substantive and procedural requirements relating to nuisance. Other types of
                    relief such as declaratory actions should also be available to tenants. One
                    situation in which specific performance is apparently not available to a tenant,
                    unless otherwise provided in the lease, is where the tenant seeks specific
                    performance of a landlord’s obligation to repair. In Borochoff Props., Inc. v.
                    Creative Printing Enters., Inc., 210 S.E.2d 809, 810 (Ga. 1974), the Georgia
                    Supreme Court affirmed a lower court’s decision that a tenant could not seek
                    specific performance of the landlord’s repair obligation because the “repair and
                    deduct” remedy (see Section II.C.1 above) was an adequate remedy at law.

          E.        Implied Covenant of Good Faith and Fair Dealing

                    1.        Historically

                    Historically, Georgia courts have not recognized implied obligations of
                    reasonableness or good faith in commercial leases. The governing principle has
                    been that “[a]bsent a limiting statute or controlling public policy, [a landlord and
                    tenant] may contract with one another on whatever terms they wish and the
                    written contract defines the full extent of their rights and duties.” Vaswani v.
                    Whohletz, 396 S.E.2d 593, 594 (Ga. Ct. App. 1990). Consequently, the Georgia
                    Court of Appeals has held that a landlord may unreasonably withhold consent to
                    an assignment where the applicable lease language simply required the tenant to
                    obtain landlord’s consent, without specifying whether the landlord could
                    unreasonably withhold consent. Id. Similarly, the court of appeals has affirmed a
                    trial court’s decision that a landlord may unreasonably withhold consent to a
                    tenant’s proposed premises alterations where the applicable lease language
                    required the tenant to obtain the landlord’s consent but did not specify whether
                    the landlord needed to be reasonable or could be unreasonable in granting such
                    consent. Nguyen v. Manley, 363 S.E.2d 613, 614 (Ga. Ct. App. 1987). Indeed, in
                    Nguyen the court declined to recognize an implied duty to be reasonable despite
                    noting “a modern trend [in other jurisdictions] of requiring reasonableness even
                    where no clause expressly requires that consent not be unreasonably withheld.”
                    Id.

                    2.        Recent Case Suggesting Shift

                    In certain cases, Georgia courts have recognized an implied covenant of good
                    faith and fair dealing in contracts other than commercial leases. See, e.g., Leader


Sutherland Asbill & Brennan LLP                                                                          27
                    Nat’l Ins. Co. v. Smith, 339 S.E.2d 321, 328 (Ga. Ct. App. 1985). Recently, the
                    court of appeals applied this implied covenant to a commercial lease.
                    Southwestern Composite Technology Corp. v. Americus-Sumter Payroll Dev.
                    Auth., 521 S.E.2d 378, 380 (Ga. Ct. App. 1999). In that case, the tenant defaulted
                    in the payment of rent, and the landlord reentered the premises without
                    terminating the lease. Id. at 379. The lease “obligate[d] the tenant to defray the
                    cost of repairs made by the landlord upon reentering the premises in the event of
                    the tenant’s default without imposing any express requirement that such costs be
                    reasonable.” Id. at 380. After the landlord reentered the premises, the roof was
                    damaged by a storm. Id. at 379. The landlord advised the tenant that it had
                    received a bid for $158,000.00 and a bid for $127,000.00 to repair the roof and
                    proceeded to accept the lower bid. Id. The landlord’s contractor apparently
                    experienced a cost overrun, and the landlord sought to recover $138,975.00 from
                    the tenant for the repair. The court of appeals determined that there was a genuine
                    issue of material fact as to whether the landlord breached the implied covenant of
                    good faith and fair dealing and reversed the trial court’s summary judgment in
                    favor of the landlord. Id. at 380.

                    It is uncertain whether the Southwestern Composite case is representative of
                    current Georgia law. That court applied the implied covenant of good faith and
                    fair dealing to a commercial lease without addressing the long history of cases in
                    Georgia that do not infer an obligation to be reasonable from commercial leases.
                    Certainly, the cases described in Section II.H.1 above do not technically address
                    the implied covenant of good faith and fair dealing; instead, they address implied
                    reasonableness. However, the court’s emphasis on enforcing the literal words of
                    the lease, without imposing additional duties of reasonableness, in our view,
                    creates doubt as to whether a Georgia court would impose the implied covenant of
                    good faith and fair dealing in a commercial lease context.

          F.        Tenant’s Ability to Recover Legal Fees

                    If the lease does not obligate the landlord to pay legal fees, the tenant typically
                    cannot recover them. “The expenses of litigation generally shall not be allowed
                    as part of the damages.” Ga. Code Ann. § 13-6-11 (Supp. 2001). However, in
                    unusual circumstances where the defendant “has acted in bad faith, has been
                    stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense,
                    the jury may allow [recovery of legal fees and expenses].” Ga. Code Ann. § 13-6-
                    11 (Supp. 2001). In addition, a tenant can recover legal fees if the lease provides
                    for the “prevailing party” to recover legal fees, and the tenant is the prevailing
                    party. See Section I.B.3(b)(3) above.

          G.        Limitations on Tenant’s Contract Remedies

                    As referenced above, the governing principle for Georgia courts reviewing leases
                    has been that “[a]bsent a limiting statute or controlling public policy, [a landlord


Sutherland Asbill & Brennan LLP                                                                        28
                    and tenant] may contract with one another on whatever terms they wish and the
                    written contract defines the full extent of their rights and duties.” Vaswani v.
                    Whohletz, 396 S.E.2d 593, 594 (Ga. Ct. App. 1990). “[I]n Georgia there is no
                    generally applicable rule of law forbidding one contracting party from waiving all
                    recourse” for breach of contract by the other party. Imaging Sys. Int’l, Inc. v.
                    Magnetic Resonance Plus, Inc., 490 S.E.2d 124, 127 (Ga. Ct. App. 1997).
                    Applying this general rule, for example, Georgia courts have enforced a provision
                    in a burglar alarm contract in which the burglar alarm company disclaimed
                    responsibility for any losses due to “failure to perform any obligation under” the
                    contract, West Side Loan Office v. Electro-Protective Corp., 306 S.E.2d 686, 687
                    (Ga. Ct. App. 1983). A lease provision that limits the tenant’s contract remedies
                    would, therefore, appear to be enforceable.

          H.        Exculpatory Provisions

                    1.        Limiting Tenant’s Tort Remedies

                    Ga. Code Ann. § 13-8-2(b) provides that, insofar as certain specified contracts
                    relating to the construction, alteration, repair or maintenance of a building
                    structure are concerned, a provision “purporting to indemnify or hold harmless the
                    promisee against liability for damages arising out of bodily injury to persons or
                    damage to property caused by or resulting from the sole negligence of the
                    promisee, his agents or employees, or indemnitee is against public policy and is
                    void and unenforceable.” Ga. Code Ann. § 13-8-2(b) (Supp. 2001). While the
                    statute seems to refer to construction contracts and the like, Georgia courts have
                    repeatedly held that exculpation clauses in commercial leases are among those
                    provisions included within the ambit of Section 13-8-2(b). E.g., Levine v.
                    Peachtree-Twin Towers Co., 289 S.E.2d 306, 309 (Ga. Ct. App. 1982); Barnes v.
                    Pearman, 294 S.E.2d 619, 621 (Ga. Ct. App. 1982), aff’d, 301 S.E.2d 647 (Ga.
                    1983); Burson v. Copeland, 287 S.E.2d 386, 387-88 (Ga. Ct. App. 1981).
                    Therefore, commercial lease clauses that exculpate landlords from liability to
                    tenants “for the result of landlord’s own negligence, defective construction or
                    failure to repair are void.” Levine v. Peachtree-Twin Towers Co., 289 S.E.2d
                    306, 309 (Ga. Ct. App. 1982). As the statute, by its terms, invalidates exculpatory
                    clauses as to the “sole” negligence of the party responsible for performing the
                    repair or construction, the Levine case’s reference to the landlord’s “own
                    negligence” suggests that courts may apply this statute more expansively.

                    2.        Limiting Tenant’s Recourse to the Subject Property

                    In a related matter, the Georgia Court of Appeals recently examined a lease
                    provision that limited the tenant’s ability to execute a judgment against the
                    landlord for breach of the lease. The provision stated that the tenant could not
                    seek to execute any judgment against any asset of the landlord other than the
                    particular property that was the subject of the lease. The court declined to enforce


Sutherland Asbill & Brennan LLP                                                                       29
                    this provision because the lease was prepared by the landlord and the provision at
                    issue was located within a lengthy “miscellaneous” section. Parkside Center, Ltd.
                    v. Chicagoland Vending, Inc., 552 S.E.2d 557, 611-12 (Ga. Ct. App. 2001).
                    Based upon this case, we recommend that landlord’s move provisions of this type
                    to a separate section of the lease that has a heading that clearly indicates that the
                    provision contains a limitation of the landlord’s liability.

          I.        Special Rights of Guarantors of Leases

                    A lease guaranty is governed by general guaranty/suretyship law. See Ga. Code
                    Ann. § 10-7-1 et seq. Lease guarantors do not have any rights or obligations other
                    than those applicable generally in guaranty/suretyship law. A full review of
                    Georgia guaranty/suretyship law is beyond the scope of this article. Instead, we
                    review selected issues of particular applicability to commercial leases.

                    1.        Identification of Lease

                    Ga. Code Ann. § 10-7-3 provides that “the surety’s liability will not be extended
                    by implication or interpretation.” Applying this principle, one Georgia court
                    determined that a guarantor was not liable for defaults under a lease because the
                    guaranty was dated February 7, 1986, the lease was dated February 10, 1986, and
                    the guaranty did not otherwise reflect the intent of the parties that the February 7
                    guaranty apply to the February 10 lease. Avec Corp. v. Schmidt, 427 S.E.2d 850,
                    851 (Ga. Ct. App. 1993). In light of Avec Corp., therefore, landlords should be
                    careful that a lease guaranty clearly references the applicable lease. We further
                    recommend that the link between the lease and the guaranty be strengthened by
                    specifically referring to the guaranty in the lease and vice versa.

                    2.        Identification of the Obligations Guaranteed

                    Georgia courts have also applied Ga. Code Ann. 10-7-3 strictly when determining
                    the specific lease obligations that are covered by a guaranty. In Benton v. Lester,
                    282 S.E.2d 174, 175 (Ga. Ct. App. 1981), the guaranty covered all “rentals.” The
                    court determined that the guaranty did not reach the tenant’s obligations to pay
                    taxes and the cost of certain repairs because the sections of the lease creating
                    those obligations did not state that those obligations were additional “rentals,” and
                    the guaranty did not state that it covered taxes and repair costs. Id. In light of
                    Benton, a landlord should be careful to make sure that the guaranty specifically
                    covers all obligations under the lease, both non-monetary and monetary.

                    3.        Notice of Default

                    Georgia cases do not clearly state whether a guarantor of a lease is entitled to
                    notice of the tenant’s default. However, Georgia courts have recognized that a
                    guarantor may waive right to notice. See First Nat’l Bank v. Rivercliff Hardware,


Sutherland Asbill & Brennan LLP                                                                        30
                    Inc., 287 S.E.2d 701, 703 (Ga. Ct. App. 1982). Therefore, we recommend that a
                    landlord’s form guaranty contain a specific waiver of notice of default.




Sutherland Asbill & Brennan LLP                                                                     31

				
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