By Nadav Ravid
When lease disputes arise, parties are often required to send notices of default to the offending party and provide the offending party with an opportunity to cure the default before action may be taken by the aggrieved party. If the offending party fails to cure its default within the time period stated in the lease, the other party may then resort to its lease remedies, such as pursuing recovery of damages or termination of the lease. In a recent case, Eucasia Schools Worldwide, Inc. v. DW August Co., the California Court of Appeals took up the issue of where notices must be sent in order to be effective.
Eucasia Schools Worldwide (Tenant) operated a private elementary school on property owned by DW August Company (Landlord). The relationship between the parties was strained, eventually leading to Landlord filing a lawsuit to evict Tenant. At some point during the parties’ dispute, Landlord’s attorney sent a notice to Tenant regarding the security deposit and guarantor of the lease. The notice was sent to the premises, pursuant to the notice provision in the lease. In response, Tenant’s attorney wrote to Landlord: “Please have NO DIRECT CONTACT with our client without the express permission of this office.” A month later, Landlord’s attorney sent a notice to Tenant’s attorney to coordinate a time to allow Landlord to inspect the Premises. Tenant’s attorney did not respond. Several months later, Landlord’s attorney sent a follow-up notice to Tenant’s attorney, this time advising that Landlord would be inspecting the premises on July 18, 2010. On the morning of July 18, Landlord, with the help of a locksmith, entered the premises.
Four days later, Tenant filed a lawsuit against Landlord for damages, claiming that Landlord entered the premises without prior notice and without consent in violation of the lease. Tenant argued that the notice Landlord sent was ineffective because it was sent to Tenant’s attorney instead of to the premises as required under the lease. The court analyzed the notice provision of the lease which states, “The addresses noted adjacent to a Party’s signature on this Lease shall be that Party’s address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon [Tenant’s] taking possession of the Premises, the Premises shall constitute [Tenant’s] address for notice” (emphasis added). Although the court agreed the lease required notices be sent to the premises, it also noted, “we cannot conclude that, when the parties signed the lease, they intended that the lease notice provision could not be superseded. Here emphatic written instructions to the contrary were given by the [Tenant].”
Based on Tenant’s attorney’s letter to Landlord, the court ruled for Landlord and concluded, “It would be unfair to penalize [Landlord] because it had complied with the written instructions of [Tenant’s] counsel. We go further: It would be absurd if the law required (1) strict adherence to the letter of the contract, and (2) disregard of counsel’s direction not to contact [Tenant].” The court awarded attorneys’ fees to Landlord.
This case is a good reminder that parties to a lease should always look to the lease to determine the correct address for notices, and also to look at any subsequent side letters or other instruction letters, such as was the case in Eucasia. Today, it is very common for parties to send notices over email on an informal basis. If a dispute arises, parties should make sure to send formal notices to the correct addresses or risk having them deemed ineffective.