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David Properties, Inc. v. Selk

    Brief Fact Summary.

    Plaintiff sued to foreclose on a property, which he sold to Defendant for $50,000 when Defendant’s last payment was overdue. Defendant counter-claimed for rental fees owed by Plaintiff for remaining on the property after his lease expired. Defendant’s counter-claim was dismissed.

    Synopsis of Rule of Law.

    A tenant who holds over after the expiration of a lease impliedly agrees to a landlord’s demand for increase in rent if the tenant continues in possession without protest.

    Facts.

    On January 18, 1957, Selk (Plaintiff) sold 320 acres of land to David Properties, Inc. (Defendant) for $50,000. Defendant paid $5,000 in cash and executed a purchase-money mortgage, under which Defendant would pay the remaining $45,000 in five installments of $9,000. While Defendant made payments on the property, Plaintiff continued to live in a small dwelling located on the 320 acres. On October 20, 1959, Defendant and Plaintiff signed a written lease allowing Plaintiff to remain on the property until December 31, 1959, in consideration for $1. Plaintiff did not vacate the dwelling by December 31, 1959. He stayed on the premises until November 27, 1961, nearly twenty-three months after the lease required him to vacate. On February 17, 1960, Defendant sent a letter to Plaintiff instructing him to vacate the property and demanding that Plaintiff pay $300 per month for use of the property after December 31, 1959. Defendant wrote Plaintiff again on February 16, 1961, instructing Plaintiff to leave and including an invoice for unpaid rent at $300 per month. Plaintiff received both letters but did not respond. On February 14, 1962, Defendant’s last $9,000 installment to Plaintiff was about one month overdue. Plaintiff wrote to Defendant demanding the $9,000 plus interest. Defendant responded, acknowledging that it owed Plaintiff $9,000 plus $405 in interest, but arguing that it was entitled to subtract $6,600 in Plaintiff’s unpaid rental fees at $300 per month for twenty-two months. Plaintiff sued to foreclose on the property. Defendant counter-claimed, demanding the unpaid rental fees. After the final hearing, the chancellor found that Plaintiff was an old man who lived in what amounted to a shack, and that his use of the property did not injure Defendant. The chancellor then dismissed Defendant’s counter-claim.

    Issue.

    Whether a tenant who holds over after the expiration of a lease impliedly agrees to a landlord’s demand for increase in rent if the tenant continues in possession without protest.

    Held.

    Yes. The chancellor’s dismissal of Defendant’s counter-claim is reversed. A tenant who holds over after the expiration of a lease impliedly agrees to a landlord’s demand for increase in rent if the tenant continues in possession without protest.

    Discussion.

    Where a tenant holds over past the expiration of a lease, the landlord has two options. He can treat the plaintiff as a trespasser and sue the tenant for damages. Damages are measured by the reasonable rental value of the property, which the landlord is deprived of by the tenant’s continued use of the property. The landlord’s other option is to waive the wrongful possession and treat the tenant holding over as a continuing tenant. The landlord is free to demand an increase in the rent. Once this demand is made, if the tenant continues in possession without protest, the tenant impliedly agrees to the increase in rent. Here, Defendant treated Plaintiff as a tenant and properly demanded an increase in rent on two occasions. Plaintiff remained in possession without protest. Therefore, Plaintiff impliedly agreed to pay $300 per month for his continued possession of the property. The chancellor relied in part on his assessment of Plaintiff as old and possibly senile, and of the property as a shack worth little in value, to determine that Defendant was not entitled to the increase in rent. However, the chancellor relied on his notions of fairness rather than the applicable law. Accordingly, this court holds that Defendant is entitled to the increased rent.


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