Can landlords terminate leases for repeated non-material defaults? Red Cliffs Corner v. J.J. Hunan Explained

In Red Cliffs Corner v. J.J. Hunan, the Utah Court of Appeals clarified when landlords can terminate commercial leases based on repeated defaults versus material defaults, providing important guidance on lease enforcement and waiver doctrines.

Background and Facts

Red Cliffs Corner leased commercial space to J.J. Hunan for a restaurant in St. George. The lease contained detailed default provisions distinguishing between material defaults (requiring ten days’ written notice and opportunity to cure) and repeated defaults (allowing termination after three consecutive months of late payments, regardless of whether cured). Hunan made late rent payments for three consecutive months from November 2004 through February 2005. RCC terminated the lease and filed for unlawful detainer. Hunan counterclaimed for breach of lease, arguing RCC failed to complete required work.

Key Legal Issues

The court addressed several issues: (1) whether the lease’s termination provision required each late payment to constitute a material default; (2) whether Hunan waived its breach of lease claims by accepting the premises “as is”; (3) the proper application of unlawful detainer statutes; and (4) whether attorney fees must be awarded under both contractual and statutory provisions.

Court’s Analysis and Holding

The court affirmed the lease termination, finding that paragraph 29 created two distinct termination rights: one for material defaults and another for repeated defaults. The repeated default provision allowed termination after three consecutive late payments “regardless of whether any default was material or previously cured.” The court rejected Hunan’s interpretation, noting it would render the repeated default section meaningless. The court also found Hunan waived its breach claims by signing a lease modification accepting the premises “as is” and failing to timely submit required plans or raise objections.

Practice Implications

This decision demonstrates the importance of carefully drafting lease default provisions. Landlords can protect themselves by including separate provisions for material and repeated defaults, allowing termination even when individual defaults don’t rise to material breach levels. For tenants, the case highlights the risk of waiver through conduct—accepting premises “as is” or failing to timely object can forfeit breach claims. The court’s reversal on attorney fees also confirms that statutory mandates for attorney fees in unlawful detainer cases cannot be overcome by routine treble damage awards.