Institute of Government
September 21, 2006*
SEVEN THINGS YOU NEED TO KNOW,
OR KNOW THAT YOU DON’T KNOW,
ABOUT LANDLORD-TENANT LAW
Landlord-tenant law is as old as feudal England and as new as the latest
consumer protection legislation, and that is one of the reasons it is often
confusing. There are others: It combines aspects of traditional contract
and property law, sometimes inconsistently. It often involves parties with
very limited resources and little or no representation, but just as often
involves parties with large amounts of money and very energetic
representation. Because these cases often begin in small claims court,
unique procedural questions are apt to arise in the process of trial de novo in
district court. Finally, there is marked tension between the competing goals
of rapid and informal resolution of disputes in the small claims context and
compliance with the complex and technical requirements in more traditional
The result of all this is something of a hodgepodge of statutory and case law
that can be difficult to navigate. The goal of this presentation is to identify
those clear rules that are vital to the correct adjudication of these cases
and, just as significantly, to highlight those areas in which there is either
inconsistency in the law or no law at all.
*It would be dishonest indeed to portray this as my work without noting
that Joan Brannon, Professor at the Institute of Government for many
years, “wrote the book” in this area. Anything written on the subject for
many years to come is likely to be informed and influenced by the foundation
of insightful analysis and comprehensive research provided by Joan.
#1:What You Need to Know About the Landlord-Tenant Relationship
There are many situations in which a property holder seeks to have an
occupant of the property removed, and the summary ejectment
procedure is alluring because it’s inexpensive, simple, and fast. The law is
quite clear, however, that this special remedy is available ONLY to
seeking to eject
Hughes v. Mason, 84 N.C. 473 (1881). In the absence of a landlord-
tenant relationship, in a case in which the remedy sought is summary
ejectment, it is often said that the court lacks subject-matter
jurisdiction. Hayes v. Turner, 98 N.C. App. 451 (1990) and College
Heights Credit Union, 109 N.C. App. 494 (1991). This does not mean that
a landowner is helpless to have an unwanted occupant removed, however;
it simply means that the specially-designed remedy of summary
ejectment is unavailable to him. Most often, the appropriate remedy is
an action in civil or criminal trespass.
The existence of a landlord-tenant relationship is an issue in the
Vendor-Purchasers: Parties involved in an installment land sale are
typically vendor-purchasers, making summary ejectment unavailable.
McCombs v. Wallace, 66 N.C. 481 (1881). This is true even if the
purchase contract specifies that the buyer’s default creates a landlord-
tenant relationship and authorizes the landlord to evict. Hughes v.
Mason, 84 N.C. 473 (1881). If a contract to purchase is completely
cancelled, however, the former buyer becomes a tenant-at-will if he
continues to occupy the property, and may be evicted. Marantz Piano Co.
v. Kincaid, 108 N.C. App. 693 (1993). Distinguish the situation in which a
lease includes an option to purchase at some time in the future, creating
a present landlord-tenant relationship supporting summary ejectment.
Jerome v. Setzer, 175 N.C. 391 (1918).
Employer-employee relationship. In the situation in which an employee
occupies housing owned by the employer, the inquiry is whether occupancy
is reasonably necessary for the better performance of the particular
service, inseparable from it, or required by the employer as essential to
the employment. Simons v. Lebrun, 219 N.C. 42 (1941). If the defendant
is able to demonstrate any of these, summary ejectment is not an
available remedy for removing the employee from the premises.
“Significant other.” Some of the most difficult cases to categorize
involve agreements between parties involved with each other as friends,
intimates, or family members. Sometimes those sharing a rental property
are guests; at other times the arrangement reflects an agreement to
lease or sublease the property. The following factors may be significant
in analyzing these cases:
a. What is the parties’ own understanding of the nature of their
b. Do the parties share a residence, or is one party in exclusive
possession? For example, does the case involve an adult child
living with elderly parents, or an adult child exclusively
occupying a house or lot owned by his parents?
c. How specific is the agreement between the parties in terms of
d. Does the consideration consist of financial or non-monetary
e. In the case of rental property, is the party sought to be
removed a sub-tenant of the lessor (e.g., a girlfriend moves in
to her boyfriend’s rented apartment and agrees to pay half the
rent) or a co-tenant of the property owner (e.g., the girlfriend’s
name is added to the lease)? (This inquiry is critical because it
identifies the party entitled to seek the specific remedy of
Motel-guest relationship. The law is clear that short-term occupancy of
a hotel or similar facility does not create a landlord-tenant relationship,
but less clear in cases in which the occupancy is for an extended term.
In these cases, factors to be considered include whether the occupier
has another residence, length of occupancy, whether occupier has
exclusive control of premises, whether he has his own key, whether he
supplies his own linen, etc. Baker v. Rushing, 104 N.C. 240 (1991).
#2:What You Need to Know About the Grounds for Summary Ejectment
Summary ejectment is a specific statutory procedure in which possession of
the property is the remedy sought. This remedy differs from those in
breach of contract cases. It is available only in four specific circumstances.
While landlords are free to file an action seeking a money judgment, or to
seek both remedies in a single action, it is critical to identify with clarity
the specific ground alleged to support ejectment and then to determine
whether the legal requirements associated with that ground have been
satisfied. Failure to correctly identify the ground for the action accounts
for a large percentage of the errors made in deciding these cases.
Is there a lease agreement (oral or written) which provides that the tenant
will have to leave if he violates the lease?
WARNING! WARNING! WARNING! Here lurks the trap most often
successful in tripping up unwary magistrates and judges. Breach of a lease
condition does not authorize a landlord to terminate the agreement and
regain possession unless the lease says it does. Remember, a lease is a
contract, and the remedy for breach of contract is not usually cancellation
of the contract. The contract has to say that specifically, and that’s the
rule in landlord-tenant law as well. G.S. 42-26(a) (2).
At common law, lease agreements often contained language sometimes
referred to as an automatic forfeiture clause and/or a right of reentry.
The rule was that when a tenant breached the lease in a manner triggering
the automatic forfeiture clause, the tenancy automatically came to an end
(or, in the alternative, came to an end when the landlord exercised his right
to re-enter). While modern leases still sometimes contain language of
forfeiture or right of re-entry, it is more common to see modern language
such as “the lessor may choose to terminate the lease.” The inquiry is the
same: does the lease (1) automatically terminate upon the occurrence of a
specified breach; (2) become vulnerable to termination at the election of the
landlord upon the occurrence of a specified breach?
Because forfeitures are not favored by the law, Morris v. Austraw, 269 N.C.
218 (1967), the court must look very carefully at the language involved to
determine precisely what the landlord is required to do to terminate the
lease. If the clause provides for an automatic forfeiture, there is little to
determine. If, however, the lease essentially sets out a required method for
the landlord to manifest his decision to terminate, then the landlord must
demonstrate that he did in fact comply with the lease requirements. Most
often, the action in question is compliance with a notice provision in the
lease. See, e.g., ARE-100/800/801 Capitola, LLC v. Triangle Labs Inc., 144
N.C. App. 212 (2001) (statement of intention to “immediately initiate
curative remedies under the Lease and under the law” insufficient statement
of intent to terminate the lease). Also note that leases sometimes contain
provisions authorizing the landlord to terminate possession without
terminating the lease itself. For ejectment purposes, there is no practical
difference: the specific terms of the contract must be complied with in
both cases. There is an important distinction, however, in the relevant
damages (see discussion below).
What if the tenant refuses to pay rent, and there’s no forfeiture clause in
This was the situation in Meroney v. Wright, 81 N.C. 390 (1879), involving a
year-long lease containing no language of forfeiture. The court dismissed
the landlord’s plea to recover his property, saying that he stood in the
position of every other creditor who delivered goods or services and failed
to receive payment for them. He could sue for the money he was owed, but
he had no right to retrieve his property before the year-long lease expired.
In 1919 the General Assembly took pity on hapless landlords and enacted
G.S. 42-3, a statute according very special treatment to one particular lease
condition: the requirement that the tenant pay rent. Unlike any other lease
condition, the law provides that a landlord may indeed recover his property
from a non-rent-paying tenant without waiting for the lease to expire. G.S.
42-3 imposes only 2 conditions on the landlord’s remedy: (1) he must make
clear demand for the rent, and then wait ten days before filing for
ejectment, and (2) he must accept rent and withdraw the suit if the tenant
offers payment (“tender”).
In summary ejectment cases based on N.C.G.S. 42-3, demand is an essential
element of the plaintiff’s case. Tenants defending based on improper
demand often attempt to show one of two things: First, that the lease
establishes a rule about how demand must be made, and the lessor failed to
follow the rule; or second, that the demand was not clear or unequivocal.
Snipes v. Snipes, 55 N.C. App. 498 (1982) (statement by lessor that she
“wanted to get all this business settled” was not a sufficient demand.)
What you need to know: If the lease does not specify forfeiture, a landlord
has no right to eject a tenant who violates lease conditions other than
payment of rent (thanks to G.S. 42-3). Consequently, a landlord who proves
only (1) a landlord-tenant relationship, (2) the existence of a valid lease
agreement, and (3) tenant’s breach of that agreement, however blatant and
frequent, is NOT entitled to summary ejectment. His remedies are instead
the familiar ones for breach of contract. Morris, id.
What you need to know: Failure to pay rent is both an independent ground
for summary ejectment under G.S. 42-3 and a potential breach of lease
condition resulting in forfeiture under G.S. 42-26(2). The confusion implicit
in this fact may be amplified if the lease contains contractual language
concerning demand. Because the 10-day demand rule and the defense of
tender apply only to ejectments under G.S. 42-3, and contractual language
controls in ejectments based on G.S. 42-26(2), it is vital that you determine
which ground applies. If there is no forfeiture clause in the lease, the
landlord’s only alternative is to proceed under G.S. 42-3. If there is a
forfeiture clause in the lease, the landlord’s only alternative is to proceed
under G.S. 42-26(2). Charlotte Office Tower Associates v. Carolina SNS
Corp., 89 N.C. App. 697 (1988) (G.S. 42-3 has no application if the parties
have considered and addressed the issue by way of a forfeiture provision in
Is the landlord seeking ejectment because the lease period has ended
Ejectments for holding over typically present only one significant legal issue:
has the lease ended? Because every lease, definitionally, ends at some point,
analysis of this question begins with categorizing the agreement into one of
two kinds: (1) a lease with a definite termination date, or (2) a lease without
a definite end point.
A lease with a definite end point ends when it says it ends. Unless the lease
itself provides otherwise, no action is required on the part of either the
landlord or the tenant to end it, including notice of any sort. If a tenant
does not leave after this sort of lease terminates, and the landlord takes no
action to bring about his departure and continues to accept rent, the law
implies a new lease agreement. If the original lease was for a fixed period
of a year or more, the new lease is for one year at a time, or “year to year.”
Murrill v. Palmer, 164 N.C. 50 (1913). Similarly, a lease for a fixed period of
a month would, in the event of the tenant staying on, be converted to a
month-to-month lease if the tenant stayed on and was recognized by the
landlord. Branton v. O’Briant, 93 N.C. 99 (1885).
Note: While the Murrill case states that a lease for a year would be
renewed for an implied term of another year, this probably does not
represent common practice today; the more typical understanding, and a
typical lease provision when the parties have contemplated this event, is
that a year-long lease converts to a month-to-month lease. The question is
one of the parties’ intention.
A lease without a definite end point may be conceptualized as a loop that
repeats until something happens to stop it. The length of the loop (or lease)
may vary from a week to a year, but it is renewed automatically at the end
of each period for an identical period unless an event occurs to stop the
renewal. Most often, a lease “from period to period” is terminated by one
party notifying the other of his/her intention to terminate the lease at the
end of the period. The most frequently litigated legal issue, then, is
whether the notice given was effective to terminate the lease.
G.S. 42-14 sets out the requirements for effective notice, and the central
one addresses how much time is allowed before the end of the tenancy. A
week-to-week tenancy is terminated by two-day notice; a month-to-month
tenancy is terminated by seven-day notice; a year-to-year tenancy is
terminated by one-month notice. A special rule allows those involved in the
rental of a mobile home space sixty-days notice, regardless of the term of
the lease itself.
What you need to know: Notice of termination never works to shorten the
current lease. For example, in a month-to-month lease, running from the
first day of the month to the last, a landlord or tenant may effectively
terminate the lease as of the end of the month by giving notice anytime
during the month with the exception of notice given within the last week of
the month. Whether notice is given on May 1 or May 22, however, the
tenancy will terminate on May 31. There is some authority suggesting that
notice given on April 30 on these facts is not effective to terminate the
lease at the end of May. Simmons v. Jarman, 122 N.C. 195 (1898).
Notice to quit may be oral or written, and no magic words are required, so
long as the intention to terminate the lease at the end of the current lease
period is clearly communicated. When the parties have agreed in the lease
about the manner in which notice is to be given, the lease provisions are
controlling in terms of determining whether effective notice was given.
What you need to know: Summary ejectment based on the tenant’s holding
over does not require any showing of fault on the part of the tenant (Note:
exception in some publicly assisted housing cases.) A tenant who
scrupulously complies with the lease provisions and pays all of his rent on
time nevertheless has no entitlement to have the lease renewed; his
continued occupation after the lease terminates is the breach justifying
#3: “But I Want to Stay!” What You Need to Know About Defenses to
The tried-and-true way of defending against any lawsuit is of course to
challenge an essential element of the plaintiff’s case-in-chief, and this is
true of summary ejectment. The law in this area is relatively straight-
forward, so long as you are very specific in identifying the asserted ground
for ejectment, so that you are very clear about the essential elements of
the plaintiff’s case. In seeking ejectment based on failure to pay rent, for
example, the landlord must prove that he made an effective demand for rent
at least ten days prior to bringing the action. This ten-day demand has no
application to an action based on breach of a lease condition, regardless of
whether the alleged breach is failure to pay rent.
Affirmative defenses to ejectment:
(1) Tender: (available only when ejectment is sought for failure to pay rent
under G.S. 42-3). The tenant may tender the proper amount at any point
prior to judgment, and if he does so, the action stops. Note that the
landlord does not have a right to reject tender and elect ejectment instead.
One common issue concerns what must be tendered. Ryan v. Reynolds, 190
N.C. 563 (1925) states that the lessee must pay the lessor the complete
amount of rent due up to the date of payment, interest, and costs. Applied
literally, the Ryan rule would have the curious result of curing the tenant’s
breach only until the next day. That is, if the May rent is due on the first
and the plaintiff tenders on May 15 an amount equivalent to ½ the rent for
the month, he will again be in breach on May 16. For this reason, many
judges interpret the tender statute to require payment of all the rent due
for the current rental period.
It is clear that the tenant is not required to pay for damage to property in
order to make a proper tender. Id. It is not clear whether tender requires
payment of attorneys’ fees if authorized by the lease agreement, or
whether it includes late fees and administrative fees incurred in bringing
(2) Waiver is a sprawling doctrine that pops up all over the place in landlord-
tenant law, but unfortunately a clear grasp of the legal principles pertaining
to waiver is elusive. As then Justice Exum said in Wachovia Bank v. Rubish,
306 N.C. 417 (1982):
Waiver has been defined as an intentional relinquishment of a known
right. . . A person sui juris may waive practically any right he has
unless forbidden by law or public policy. The term therefore covers
every conceivable right—those relating to procedure and remedy as
well as those connected with the substantial subject of contracts.
Sometimes [waivers] partake of the nature of estoppel and sometimes
Id. at 426.
Waiver is most frequently raised as a defense in summary ejectment cases
when the landlord seeks ejectment based on breach of a lease condition, and
the tenant claims the landlord has “waived the breach.” In the clearest
case, the landlord is aware of the breach and has continued to accept rent
from the tenant nevertheless. In this situation, numerous cases have held
“It is the generally accepted rule that if the landlord receives rent
from his tenant, after full notice or knowledge of a breach of a
covenant or condition in his lease, for which a forfeiture might have
been declared, such constitutes a waiver of the forfeiture which may
not afterwards be asserted for that particular breach, or any other
breach which occurred prior to the acceptance of rent.”
Winder v. Martin, 183 N.C. 410 (1922) and many others.
The underlying principle is that as soon as a lessor learns that he has the
option of taking possession of the property, whether because the lease
period has ended or because a breach triggering forfeiture has occurred, he
has a choice: he may exercise his right to terminate the contract, or he may
choose to accept things as they are and continue with the contract.
Fairchild Realty v. Spiegel, Inc., 246 N.C. 458 (1957). Any behavior (such as
accepting rent) that indicates his decision to continue with the contract puts
an end to his opportunity to terminate the lease.
This rule has been applied in the frequent instances in which lessors have
attempted to retain both options: Office Enterprises v. Pappas, 19 N.C. App.
725 (1973) (landlord accepted checks in payment of rent, but turned them
over to his attorney rather than cashing them held to have waived breach);
Fairchild, supra (lessor objected to assignment, refused to accept payment
from assignee, and repeatedly stated to lessor/assignor that it would
terminate the lease if the breach were not cured, held to have waived
breach by accepting rent from lessor/assignor); Community Housing
Alternatives v. Latta, 87 N.C. App. 616 (1987) (written notice of termination
and demand for possession as of certain date held unenforceable by
acceptance of rent after termination date); Raleigh City Limits, Inc. v.
Sandman, 49 N.C. App. 107 (1980) (conversion of rent checks into “official
bank checks”, not deposited into lessor’s account, accompanied by statement
that checks were not accepted held to have waived right to assert breach of
lease condition as basis for summary ejectment.)
What is unclear: whether and under what conditions a lessor may accept
payments for past-due rent without waiving his right to seek ejectment on
breach of lease condition.
Waiver is frequently an issue in commercial leases, in which the lease
specifies that the lease period may be renewed upon notice to the lessor.
Sometimes, over the course of many years, the formalities of notice set out
in the lease come to be disregarded by the parties. In these cases,
particularly when successors-in-interest appear on the scene, the legal issue
will be whether the lessee’s renewal of the lease is effective, despite his
failure to comply with the lease provisions, due to the previous waiver of
those formalities by the lessor. In Wachovia Bank, supra, the Court found
that the executor of the landlord’s estate was estopped from asserting the
requirement of written notice if the jury found that the deceased landlord
had previously allowed renewal upon oral notice on two occasions. See also
Culler v. Watts, 67 N.C. App. 735 (1984).
When is consideration required? Application of the waiver doctrine is
sometimes unclear when considered in light of the principle that an
agreement between parties to modify the terms of a contract in a way
involving a substantial right must be supported by consideration. Wheeler v.
Wheeler, 299 N.C. 633 (1980). This confusion reflects the above-mentioned
murkiness surrounding “waiver” in the contract sense vs. “waiver” in the
equitable sense. Clearly, an agreement to forego, or waive, a substantial
contractual right (such as the right to renew a lease) must be supported by
consideration. Contrast this with the situation in which one party is misled
to his detriment by behavior of the other party inconsistent with intent to
terminate the lease; in this case, waiver in the equitable sense prevents the
misleading party from benefiting, and no consideration is required. For a
comprehensive discussion of this somewhat confusing area, see Wachovia
Bank v. Rubish, supra.
There is apparently a third option for a landlord faced with breach who
desires neither to waive performance nor terminate the lease: he may
attempt to compel the tenant’s compliance with the lease agreement by
clearly stating his intention to terminate the lease at a particular time in the
future if the tenant has not by then cured the breach. Fairchild, supra. The
waiver doctrine will apply, however, if the landlord accepts rent after the
declared termination point, if he is aware that the tenant has elected not to
cure the breach. Id.
What is not clear: often the particular facts of a case raise difficult
questions about the scope of a waiver. If the tenant has a dog in violation of
a lease condition for which forfeiture is specified, for example, and the
landlord accepts rent with knowledge of the breach for three months, case
law pertaining to the landlord’s forced election suggests that the landlord
has may have forever waived his right to enforce the lease provision.
Similarly, if the tenant fails to pay rent for January, where the lease
contains an applicable forfeiture clause, and then pays for February, what
are the landlord’s options when the tenant fails to pay for March? Quite
possibly, the two situations would be analyzed differently, with failure to
pay rent treated as individual breaches and keeping a dog as one ongoing
breach. A related question concerns the significance of the February
payment. If the landlord applies that payment to the January debt, can he
consider failure to pay February rent a new breach and seek ejectment?
(3) Retaliatory eviction. N.C.G.S. 42-37.1-37.3 sets out the 1979 legislative
effort to protect tenants from eviction in retaliation for exercise of their
rights to “decent, safe, and sanitary housing.” The statute sets out a
procedure by which tenants may assert retaliatory eviction as an affirmative
defense in a summary ejectment action. It also lists a number of ways a
landlord may rebut the defense and accomplish ejectment. There are no
N.C. cases discussing the statute, which is written in a clear and
comprehensive manner and thus hopefully will present few difficulties to
judges faced with applying the statute.
What we don’t know: whether a landlord may evade the reach of the statute
by raising the rent to an unreasonably high amount, or otherwise acting in a
manner calculated to force the tenant to “voluntarily” terminate the
tenancy. One commentator has noted that the stated policy of the statute,
along with the response of other states that have considered the issue,
supports a determination not to allow a lessor to do indirectly what he may
not do directly. Brannon, Trying Summary Ejectment and Other Landlord-
Tenant Actions (1996).
(4) Violation of the Residential Rental Agreements Act is a frequently-
asserted defense in summary ejectment actions and will be discussed below
in the section on Rent Abatement4.
#4: What You Need to Know About Damages
The most frequent damage item sought in landlord-tenant cases is of course
unpaid rent. Correct application of the rules regarding damages is simplified
by one basic concept: rent is the amount due under the lease agreement; if
the lease has been terminated, the tenant is no longer obligated to pay rent,
but is instead required to pay damages for occupancy of the premises after
the end of the lease (fair rental value of the premises). Seligson v. Klyman,
227 N.C. 347 (1947).
In a periodic tenancy, when the landlord seeks summary ejectment, he is
usually (but not always) choosing to terminate the lease. In this case,
damages would consist of:
1) Past-due rent, up to the date the lease ended;
2) Damages for occupancy for the period between the end of the lease
and trial; (frequently, but not necessarily, the equivalent to rent);
3) Any special damages that might occur;
4) Interest and costs.
NOTE: in Chrisalis Properties Inc. v. Separate Quarters, Inc., 101 N.C. App.
81 (1990) the court observed that a landlord is free to seek possession in
one lawsuit and monetary damages arising out of the lease in another, G.S.
42-28, but held that if he elects to seek any damages whatsoever in the
summary ejectment action, res judicata will bar a subsequent suit for
damages arising out of the same lease agreement.
Quite different legal issues arise in typical commercial leases, which are for
a set period of time. In these cases, it frequently happens that lessees
abandon the premises prior to the expiration of the lease. The general rule
applicable to breach of contract cases, of course, is that the nonbreaching
party has a right to be returned as much as possible to the position he would
occupy if no breach had occurred. In the case of a five-year lease with
$1000/mo. rent, the “non-breach” position would be $60,000, paid in monthly
installments over a five-year period. The tenant defending this case often
asserts one of two defenses: He may assert that the landlord “accepted his
surrender” of the rental agreement. This assertion must be supported by
evidence, explicit or implied, that the landlord intended to declare the lease
forfeited. In this case, damages would be the same as those described
above for a periodic tenancy. The clearest manifestation of non-acceptance
is to continue to treat the premises as being in the exclusive custody of the
tenant. See Austin Hill Country Realty v. Palisades Plaza, 948 S.W.2d 293
(1997) for an excellent discussion of this issue.
The behavior most often pointed to by tenants in support of a claim of
acceptance is that the landlord has re-entered the premises and assumed
control, typically by readying the premises for re-rental. See, e.g., Eutaw
Shopping Center v. Glenn, 39 N.C. App. 67 (1978). In Monger v. Lutterloh,
195 N.C. 274 (1928), the court acknowledged that a landlord who opts to re-
enter in preparation for re-renting is acting in accord with public policy to
encourage productive use of real property and to mitigate damages. The
court said that a landlord should “not necessarily” be held to have accepted
the surrender of the lease in these circumstances, but indirectly suggested
that a landlord would be well-advised to make his intentions clear. A
landlord who takes no action to exert control over the rental property runs
the risk of encountering tenant’s second line of defense: failure to mitigate.
The tenant may assert that the landlord failed to take reasonable measures
to mitigate damages. Isbey v. Crews, 55 N.C. App. 47(1981). The party
asserting failure to mitigate has the burden of introducing evidence of this
allegation. Id. If a landlord can re-rent premises, the amount he collects is
offset against the contract amount owed by the breaching tenant. Eutaw
Shopping Center v. Glenn, 39 N.C. App. 67 (1978).
Sometimes in a tenancy for a definite period, the landlord seeks summary
ejectment, but does not seek to terminate the lease. These cases are
always based on a provision in the lease that allows the lessor, upon breach
of a lease condition, to erminate possession without terminating the lease
itself. In these cases, the landlord is entitled to damages as specified in the
lease itself, rather than damages for occupancy.
#5: What You Need to Know About “Appeal for Trial De Novo.”
Just looking at it, you know there’s going to be confusion. “Appeal” certainly
suggests that something—significant—has happened previously. “De novo”,
on the other hand, indicates that this proceeding is new. The tension in the
title is reflected in the legal issues surrounding this odd duck.
G.S. 7A-229 states that the district judge may order repleading or further
pleading, or may try the case on the pleadings as filed. This provision has
been cited in cases in which the appellant objects to the appellee raising
unpleaded affirmative defenses at the de novo hearing. The Court of
Appeals has held that the rule requiring affirmative defenses to be pled or
else waived does not apply in cases appealed from small claims court. Don
Setliff & Associates, Inc. v. Subway Real Estate Corp., 631 S.E.2d 526 (N.C.
App. 2006) (estoppel); Aldridge v. Mayfield, 164 N.C.App. 779, (unpublished
opinion) (2004) (res judicata).
A somewhat similar issue arose with regard to counterclaims. The question
was whether a compulsory counterclaim barred in small claims court because
of the jurisdictional limit would be forever lost if defendants failed to
appeal and assert it at the district court level. The court in Fickley v.
Greystone, 140 N.C. App. 258 (2000) reached exactly that result. In 2005
the General Assembly amended the statute to make clear that the result in
Fickley is not the law; “failure . . . to file a counterclaim in a small claims
action. . . or failure by a defendant to appeal a judgment in a small claims
actions to district court shall not bar such claims in a separate action.” G.S.
What we don’t know: The result of failing to file a counterclaim that would
be considered compulsory under Rule 13 if a defendant does in fact appeal to
district court is unclear. Cloer v. Smith, 132 N.C.App. 569 (1999), decided
before the statute was amended, suggests that a subsequent claim would be
barred by res judicata, unless the language of the amendment is construed
to apply to cases in which an appeal is taken.
The question of whether a subsequent claim is barred on res judicata
grounds came up again in First Union National Bank v. Richards, 90 N.C. App.
650 (1988). In that case, plaintiff sought to recover on a note, appealing
the magistrate’s dismissal to district court. Before the case came on for
hearing, however, plaintiff took a voluntary dismissal without prejudice
under Rule 41. When plaintiff refilled the action, defendant claimed the
previous magistrate’s judgment dictated the result based on res judicata.
The Court recognized that, had the plaintiff failed to appear and prosecute
the appeal, the magistrate’s judgment would have become final. The same
result would have occurred had the plaintiff withdrawn or dismissed the
appeal. In this case, however, plaintiff dismissed not the appeal, but the
action itself. “When plaintiff gave notice of appeal for trial de novo in
district court,” the Court of Appeals said, “it was as if the case had been
brought there originally.” Plaintiff’s Rule 41 dismissal effectively wiped out
the judgment of the magistrate, so that there was no previous “final
judgment” upon which to base the doctrine of res judicata.
Another procedural question concerns legal representation at the two
courts. Small claims court, of course, is designed to allow access by citizens
unrepresented by attorneys. In Duke Power v. Daniels, 86 N.C. App. 469
(1987) the Court of Appeals held that a corporation as well as an individual is
entitled to appear pro se in that court. In Lexis-Nexis, Div. of Reed
Elsevier, Inc. v. Travishan Corp., 155 N.C.App. 205 (2002) the Court declined
to extend that rule to district court, declaring that corporations must be
represented by attorneys or else be liable for the unlawful practice of law
under G.S. 84-4.
The question of when the usual rules will apply and when they will not in
appeals for trial de novo is likely to be decided on a case-by-case basis. In
2005, a divided panel of the Court of Appeals considered a broader answer,
holding that “unless otherwise specified, the legislature intended that the
informal processes of the small claims court continue in the de novo appeal.”
Jones v. Ratley, 168 N.C.App. 126 (2005). The Supreme Court, in a per
curiam opinion, adopted the argument of the dissent, which stated that the
duty of the judge sitting without a jury to make findings of fact and
conclusions of law sufficient to permit review was unaffected by the action’s
origin in small claims court. Jones v. Ratley, 360 N.C. 50 (2005). It is
unclear whether the Supreme Court also endorsed language in the dissent
interpreting prior case law as “support[ing] the application of the general
rules to all cases in district court, including those that originate in small
claims court but are appealed for trial de novo.” The dissent repeatedly
emphasized its contention that appeal for trial de novo resulted in an instant
transformation of the small claims case to one identical to that having been
originally brought in district court. It is perhaps informative that the Court
of Appeals later faced an argument (in Setliff, supra) that the Rules of Civil
Procedure fully apply in appeals de novo, citing Jones. The Setliff Court
distinguished Jones, saying that that case applied only to the duties of the
trial judge, not to the larger question of procedure in general. Stay tuned . .
#6: What You Need to Know About Rent Abatement.
G.S. Ch. 42, Art. 5, the Residential Rental Agreements Act, allows a tenant in
a residential lease agreement to recover damages, in the form of rent
abatement, for a landlord’s failure to provide fit premises. The statute
provides that damages are available in the form of “recoupment,
counterclaim, defense, setoff, and any other proceeding.” G.S. 42-40(1).
While the statute sets out a comprehensive scheme clarifying the duties of
both landlord and tenant, there are many questions about how the statute
should be implemented. In the specific area of rent abatement, the Court
of Appeals has provided us with some interesting answers.
Miller v. C.W. Myers Trading Post, 85 N.C. App. 362 (1987) was the first
case to discuss the new legislation at length, establishing the following rules
in dealing with these claims:
1) The applicable statute of limitations is three years.
2) Punitive damages are not available (although treble damages under
G.S. 75-1.1, the Unfair Trade Practices statute often are. Cotton v.
Stanley, 86 N.C. App. 534 (1987).)
3) The amount of rent abatement is calculated by determining the
difference between the fair rental value of the premises as
warranted and the fair rental value of the premises in their unfit
condition, plus any special or consequential damages incurred.
Subsequent cases further clarified the Act:
What kind of evidence is required to prove damages? Expert evidence of
fair rental value is not required—indeed, no direct evidence of fair rental
value is required at all. While the tenant is entitled to offer an opinion about
fair rental value, the Court in Cotton, supra, held that any person familiar
with the premises might testify to their condition, providing indirect
evidence of rental value. In addition, the actual rent agreed to provides
some evidence. So long as sufficient facts are available for the trier of fact
to make a determination based on his own information and experience, the
evidence will be sufficient to support a finding.
Who may be held responsible for a violation of the Act? Surratt v. Newton,
99 N.C. App. 396 (1990) no doubt sent a shockwave through the real estate
community with its holding that a rental agent is a proper party defendant if
he had actual authority to repair and failed to do so. Further, while the
tenant’s recovery of damages in a claim for rent abatement is limited to that
amount actually paid for rent, recovery is not limited by the amount of the
rental agent’s commission. Id.
What we don’t know: whether a landlord’s violation of the RRAA is a defense
to an action seeking possession of the premises. This uncertainty is
heightened by two seemingly inconsistent statutory provisions in the
Residential Rental Agreement Act. In G.S. 42-41, the tenant’s obligation to
pay rent and the landlord’ obligation to provide fit premises are said to be
“mutually dependent”. As a general rule, when contract provisions are
mutually dependent, failure of performance by one party excuses
performance by the other. The argument might thus be made that a
landlord’s failure to provide fit premises excuses the tenant’s obligation to
pay rent, and that a summary ejectment action based on failure to pay rent
should fail. G.S. 42-44(c), however, provides that a tenant may not
unilaterally withhold rent prior to a judicial determination of a right to do
so. While it is difficult to imagine how such a judicial determination might
operate, this statute seems to say that a landlord’s violation of the RRAA
does not justify a tenant’s unilateral withholding of rent.
Our courts have not directly addressed this issue. In Creekside
Apartments v. Poteat, 116 N.C. App. 26 91994), the question was asked but
not answered, when defendant claimed that the trial court erred in ordering
ejectment in the face of demonstrated violation of the RRSS, asserting the
the landlord sought ejectment “with unclean hands.” The Court did not
directly respond to the tenant’s claim, noting that the order of ejectment
was not based on failure to pay rent, but instead on a determination by the
City that the premises were unfit for habitation.
#7: What You Need to Know About Vacationers, People Involved in
Domestic Violence, Members of the Military, Criminals, People Living in
Federally Subsidized Housing, and People Who Have Filed for
Different rules apply.
Obviously, this is a topic for another day, and another handout. In the
meantime, though, be aware that there are statutory provisions pertaining
to landlord-tenant law and litigants in all these categories.