Utah Court of Appeals
Can a landlord anticipatorily breach an option agreement when tenants are in default? Hardy v. Montgomery Explained
Summary
Hardy leased his home to the Montgomerys with an option to purchase, receiving $7,000 as consideration. When Hardy told the Montgomerys he would no longer provide seller financing while simultaneously giving them seven days to cure defaults, the trial court found anticipatory breach. The court awarded judgment to the Montgomerys but the appeals court remanded on the waiver issue.
Practice Areas & Topics
Analysis
In Hardy v. Montgomery, the Utah Court of Appeals addressed whether a landlord could anticipatorily breach an option agreement when the tenants were already in default under the lease.
Background and Facts
Richard Hardy leased his Helper, Utah home to Jeremy and Julie Montgomery with an option to purchase for $126,775. The Montgomerys paid $7,000 as consideration for the option and were required to pay $700 monthly rent plus $100 for taxes and insurance. The lease incorporated a Real Estate Purchase Contract (REPC) requiring Hardy to provide seller financing. The Montgomerys paid only $700 per month, never the additional $100, and made some late payments. In July 2013, Hardy told the Montgomerys he no longer wanted to sell to them. His September 2013 letter stated he would not provide financing but gave them seven days to cure defaults before termination.
Key Legal Issues
The primary issue was whether Hardy could anticipatorily breach the option agreement when the Montgomerys were in default. Secondary issues included whether the REPC was incorporated into the lease, whether Hardy waived his right to collect additional rent, and the proper calculation of damages.
Court’s Analysis and Holding
The court found that Hardy’s statements constituted anticipatory breach. Although the Montgomerys were in default, they retained the right to cure their breach and exercise the option. Hardy’s promise to give seven days to cure while simultaneously withdrawing his financing obligation prevented meaningful opportunity to cure. The court held that “a default only suspends the non-defaulting party’s performance until it is discharged when the default amounts to a total breach,” and Hardy’s anticipatory repudiation breached the option agreement. However, the court remanded on the waiver issue, finding the trial court failed to adequately address the lease’s non-waiver provision.
Practice Implications
This decision highlights the importance of allowing meaningful cure periods when dealing with option agreements. Practitioners should ensure clients do not take contradictory actions when providing default notices. The court’s handling of the waiver issue also demonstrates the need for trial courts to explicitly address non-waiver provisions in their findings, even when other evidence suggests waiver occurred.
Case Details
Case Name
Hardy v. Montgomery
Citation
2018 UT App 133
Court
Utah Court of Appeals
Case Number
No. 20160148-CA
Date Decided
June 28, 2018
Outcome
Affirmed in part and Remanded in part
Holding
A party may anticipatorily breach an option agreement even when the optionee is in default, if the party prevents the optionee from curing the default within a reasonable time period.
Standard of Review
Factual findings reviewed for clear error unless clearly erroneous; conclusions of law reviewed for correctness; waiver presents a mixed question of law and fact where legal standard is reviewed for correctness and underlying facts are reviewed for clear error with deference to trial court
Practice Tip
When giving notice of default with opportunity to cure, avoid taking actions that would make performance impossible during the cure period, as this may constitute anticipatory breach.
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