In Baca v. Kuang, 107 Cal. App. 5th 1292, 328 Cal. Rptr. 3d 854 (2025), the California Court of Appeals held that a landlord had consented to renewing a month-to-month tenancy where the landlord continued to unconditionally accept and deposit the tenant’s rent payments even after the landlord issued a 30 day termination notice and commenced an unlawful detainer action.

Baca Properties, as landlord, and Yonghe Kuang, as tenant, were parties to a one year commercial lease from 2014. The lease was subsequently extended and the rent increased several times. The lease included a standard holdover provision that required the tenant to pay double the rent if it failed to surrender the premises after the lease expired.  The lease also contained a no-waiver provision stipulating that rent acceptance would not excuse any prior breaches of the lease except for a breach tied to the particular rent amount that was accepted.

In 2019, the parties amended the lease to convert it to a month-to-month lease. In March 2022, Baca Properties issued a 30 day notice to terminate Kuang’s tenancy. Following negotiations, the parties entered into a further amendment in June 2022 that extended the lease on a month-to-month basis and increased the rent. In December 2022, Baca Properties issued another notice to terminate Kuang’s tenancy with the termination to be effective January 31, 2023.

Despite the termination notice, on February 6, 2023, Kuang continued to occupy the premises and submitted a rent payment that Baca Properties deposited the same day. The following day, Baca Properties filed an unlawful detainer action against Kuang alleging that Kuang was holding over in the premises. For the next three months, during pendency of the action, Baca Properties continued to invoice Kuang for the regular monthly rent. Kuang paid the rent pursuant to the invoices and Baca Properties promptly deposited each payment of rent, without reserving any rights.

During the trial, Kuang argued that by accepting multiple payments of rent after the 30 day notice expired, Baca Properties had renewed the lease pursuant to Section 1945 of the California Civil Code. Section 1945 creates a rebuttable presumption that a lease is renewed (month-to-month when rent is payable monthly), whenever a landlord accepts rent from a tenant after the expiration of a lease. Baca Properties countered that Section 1945 did not apply because it was superseded by the terms of the lease. Specifically, Baca Properties relied on the no-waiver provision and the obligation of tenant to continue to pay rent until all obligations were satisfied, in this case, until surrender. The trial court sided with the landlord and awarded Baca Properties holdover damages and attorney’s fees.

The California Court of Appeals reversed this decision, finding that Section 1945 did in fact apply because Baca Properties continued to invoice Kuang and deposit Kuang’s payments for four months after issuing the termination notice without any qualification or objection and without any offer to return the payments.  The Court of Appeals distinguished situations where a landlord inadvertently cashed a rent check after lease expiration and then offered to return it.

In reaching its conclusion, the Court of Appeals also rejected the landlord’s reliance on the no-waiver provision, holding that it was inapplicable.  The no-waiver provision is meant to protect a landlord that accepts rent from waiving a breach of the lease that is unrelated to the payment of the rent accepted.  Here, the landlord did not claim that the tenant was in breach of any provision other than its failure to surrender the premises.  The Court of Appeals concluded that the tenant’s failure to surrender had not yet materialized into a breach at the time that Baca Properties accepted the rent payment.

This ruling serves as a critical reminder to landlords to be careful when accepting rent payments after lease termination. Such actions can lead to unintended consequences, including renewing a tenancy, which may complicate eviction or termination efforts in the future.