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Texas Commercial Real Estate Leases Mean What They Say!

A substantial part of my Texas real estate law practice over the past thirty years has involved Texas commercial real estate leases, representing both landlords and tenants (often representing either landlords or tenants who are based outside of Texas). An issue that frankly does not come up often is the timing of notices by one party or the other, or the timing of payments by the tenant to the landlord, in part because commercial lease language regarding the timing of notices or payments is generally clearly written. A recent Texas case by the Texas Eleventh Court of Appeals reiterates that the lease means what it says.

In the case of John B. Meadows, et al. v. Midland Super Block Joint Venture, the 11th Texas Court of Appeals held that when the lease in question required that a payment or a notice had to be delivered to the landlord by the first of the month, a payment or notice that was only mailed by the first of the month, and was received several days after the first, was insufficient, and the landlord’s termination of the lease was proper.

839855_ancient_handwriting_3.jpg The tenant argued that the “mailbox rule” applied, that is, that payments or notices deposited in the mail by the first of the month are timely. The Court of Appeals said not so, because the express language of the lease stated that the payment or notice had to be delivered by the first. In the Court’s view, “delivered” clearly means “received by”.

This lease was unusual, in that it was a month to month lease, and each additional month was considered an option, which the tenant could exercise only by notice or payment each month on or before the first. In Texas, as the Court notes, “(e)xercise of an option, unless excused in rare cases of equity, must be unqualified, unambiguous, and strictly in accordance with the terms of the agreement.” Would the Court have decided differently if this had been a lease for a stated term and one of the monthly rent payments within the term was late? Very possibly so.

The landlord also argued that the tenant defaulted because the lease required that the payments or notices be sent registered or certified mail, and in this case the tenant’s payment was sent regular mail. The tenant submitted evidence that payments had been sent via regular mail for 14 years. Based on this evidence, the Court found that the landlord had waived the lease provision requiring certified mail. Apparently all prior payments, even though sent by regular mail, were delivered on or before the first of the month, because there was no waiver argument by the tenant that the timing of the payment was waived by the landlord.

It’s hard to imagine why a tenant would have agreed to so onerous a lease term in the first place! This case is yet another lesson for landlords and tenants that the lease means what it says.