Atkin’s Waste Materials, Inc. v. The City of Rochester, 42 A.D.2d 425 (4th Dep’t 1973)
Acceptance of rent by a landlord, with knowledge of a tenant’s alleged defaults under a lease, constitutes a waiver of those defaults, effectively affirming the continuation of the landlord-tenant relationship.
Summary
Atkin’s Waste Materials, Inc. leased property from the City of Rochester for scrap processing. After Atkin’s renewed its lease option, the City rejected it, alleging failures to comply with the lease terms. However, the City continued to accept rent payments. The court held that by accepting rent with knowledge of the alleged defaults, the City waived its right to reject the lease renewal based on those defaults. The City was acting in a proprietary, not governmental, capacity and was bound by the lease terms. The court reinstated the trial court’s judgment in favor of Atkin’s.
Facts
Atkin’s Waste Materials operated a scrap processing business on land leased from the City of Rochester since 1942. A 1964 lease required Atkin’s to obtain a variance, which was granted. A 1967 lease, renewing the 1964 lease, incorporated the variance. The City Manager advised that minor torch burning could continue if compliant with city codes. The lease obligated Atkin’s to accept scrap from the City without charge and contained a renewal option. In 1967, Atkin’s received a notice regarding open burnings, some caused by the condition of the scrap delivered by the City. Despite this, the City continued to deliver scrap. An inspection in 1970 found Atkin’s in “substantial compliance.”
Procedural History
Atkin’s exercised its option to renew the lease. The City rejected the renewal via ordinance 71-212. Atkin’s brought suit challenging the rejection. The trial court found that Atkin’s had properly exercised its option to renew. The appellate court reversed the trial court’s judgment, but this court reversed the appellate court and reinstated the trial court’s judgment.
Issue(s)
Whether the City, by accepting rent from Atkin’s with knowledge of alleged lease defaults, waived its right to reject Atkin’s exercise of the lease renewal option based on those defaults.
Holding
Yes, because the acceptance of rent with knowledge of a tenant’s default constitutes a waiver of that default, thereby affirming the continuation of the lease agreement.
Court’s Reasoning
The court reasoned that when a landlord accepts rent with knowledge of conduct alleged to be a lease default, it waives the right to claim that conduct as a basis for terminating the lease. This acceptance is an election to continue the landlord-tenant relationship. The court emphasized that the City, in its role as landlord, acted in a proprietary capacity, not a governmental one. The lease should be construed reasonably, considering the parties’ intentions. The court noted that the City continued to require Atkin’s to accept scrap despite knowing that the condition of the scrap contributed to the burnings. The Court cited Woollard v. Schaffer Stores Co., 272 N.Y. 304, 312; Murray v. Harway, 56 N.Y. 337, and stated that substantial compliance with the lease terms is what was required, and the City’s acceptance of rent waived any right to claim a default. The court also emphasized that Atkin’s was entitled to “reasonable notice of the conditions and a reasonable opportunity to cure the default.”