A recent Wisconsin decision underscores the importance of accurately drafting a permitted use clause to describe the entirety of a tenant’s intended business.  In 1050 Lillian St., LLC v. Greenlock, LLC, 2024 Wisc. App. LEXIS 156, 2024 WL 722404, a Wisconsin Court of Appeals concluded that the tenant violated the use clause that allowed the premises to be used as a pet “boarding facility” by also offering pet grooming and pet daycare services.  Consequently, the Court upheld the tenant’s eviction.

In 2019, the original tenant, Luna Pet Resort, signed a lease with the landlord that permitted it to use its premises “for the purpose of operating a pet and cat boarding facility” and prohibited other uses “without the prior written consent of landlord.”  The landlord also leased space in the same building to two other pet-related businesses, one offering a “pet grooming facility” and the other a “dog day care and training facility.”  The landlord explained that its intent was for the three businesses to offer complementary services that were not competitive.

Following its opening, Luna Pet Resort occasionally offered bathing and nail-trimming services to boarded dogs (but did not advertise grooming services), and in 2020, in response to declining business due to the COVID-19 pandemic, expanded its services to include doggie daycare for a limited time, with the landlord’s approval.

In 2021, one of the tenant’s employees purchased Luna Pet Resort’s assets and began to advertise and offer boarding, doggie daycare, and grooming services for non-boarded pets.  In August 2022, the landlord sent the new tenant a letter demanding that it stop advertising and providing the grooming and day care services in violation of the lease.  The tenant refused, and the landlord brought an eviction action.

In the resulting litigation, the tenant claimed that she should be entitled to keep offering these services because the word “boarding” was ambiguous and could be interpreted broadly to include grooming and day care services, as evidenced by the fact that the landlord previously permitted the original tenant to offer these services.  The Court disagreed, stating that the definition of “boarding” according to the dictionary is clear and unambiguous and refers to the provision of regular meals with lodging in return for payment, and that while daycare could arguably fall within this provision, the definition does not encompass grooming.  The Court added that because the definition of “boarding” is unambiguous, the landlord’s prior approval and its course of conduct constitutes extrinsic evidence that should not be considered in determining the meaning of “boarding.”

The Court also rejected the tenant’s claim that the landlord waived its right to enforce the use clause based on the landlord’s prior approval of the additional services.  The Court relied on Wisconsin Statute Section 799.40(1s) and the non-waiver provision in the lease; specifically, that the landlord’s failure to raise a default against the original tenant for expanding its use did not result in a waiver of the landlord’s rights for a subsequent similar breach by the tenant.

This case is an important lesson for landlords and tenants to carefully draft their use clause provisions as broadly or narrowly as each side may desire to avoid any ambiguity and costly litigation.