In the absence of an acceleration clause, no action may be brought for future rent under a long-term lease.
The parties entered into a 20-year lease whereby a tenant, Taco Bell Corporation (Taco Bell), was to construct and operate a fast-food restaurant on the premises. Due to community opposition, Taco Bell never constructed the restaurant and served on the landlords, Gotlieb and Blaymore, a written repudiation of the lease. Also, the tenant never paid any rent due under the lease. Gotlieb and Blaymore instituted an action against Taco Bell for an alleged breach of a commercial ground lease. A district court judge granted summary judgment in favor of Gotlieb and Blaymore and referred the matter to the court for a trial on damages. The parties consented to proceed before a magistrate judge for all purposes.
Were Gotlieb and Blaymore entitled to damages?
The district court judge who granted summary judgment found that the landlords were not required to accept the repudiation by Taco Bell. On the issue of damages, however, the magistrate judge determined that the landlords had negotiated and made a written offer to lease the premises for the landlords' sole benefit to a new tenant. The magistrate judge concluded that, by their affirmative conduct, the landlords had accepted Taco Bell's repudiation and surrender of the lease by operation of law. As such, Taco Bell was liable for accrued rent up to the time the landlords accepted the surrender because a tenant who chose never to occupy the premises was nevertheless liable for rent. Lastly, the landlords' acceptance of the surrender operated to discharge the tenant from all liability for future rent where the lease contained no acceleration clause.