Rent prices in Charlotte are increasing, and these increases often lead to an uptick in evictions, as more tenants are unable to make their monthly payments. In North Carolina, a landlord can evict a tenant through a process called summary ejectment. In a typical summary ejectment action, a landlord alleges a valid lease agreement with the tenant, and alleges the tenant has breached the terms of the lease agreement, most frequently by failing to pay rent. The court will review the lease agreement, determine if the tenant in fact breached its terms, and determine if the landlord followed the statutory and/or contractual requirements to notify the tenant of his breach. The process is typically straightforward, but what happens when the parties do not have a valid lease agreement? In such a situation, does a tenancy exist and, if so, what are the rights and responsibilities of both parties?
Mauney v. Norvell: North Carolina’s Recognition of Tenancy at Will
In 1920, the Supreme Court of North Carolina addressed the questions above. In Mauney v. Norvell, the parties orally agreed to a lease for more than three years. At the time, North Carolina law required all “leases and contracts for the leasing [of] lands, exceeding in duration three years” to be in a signed writing. This law is a direct predecessor to the current “statute of frauds.” Today, as in 1920, all contracts regarding the lease of real property for a duration exceeding three years must be in writing, signed by the party to be charged with the contract. Failure to satisfy this requirement renders the contract void, or unenforceable. As a result, the parties in Mauney lacked a valid lease agreement. The court held that “[when] one goes into possession of land under an invalid lease, his tenancy at the inception is a tenancy at will.” (internal quotations omitted). A tenancy at will is the legal recognition of the tenant’s right to possession of the premises to the extent the landlord willingly allows him to remain in possession. The tenancy is terminated instantly upon the landlord’s demand for possession. Further, the tenant in Mauney paid rent pursuant to the void oral lease agreement, and the landlord accepted those payments. Despite this, the court held “payment of the rent did not create a lease between the plaintiff and the defendant, but was simply for the use and occupation of the premises . . . .” As a result, the landlord was entitled to evict the tenant instantly upon his demand for possession.
On its face, the Mauney holding appears unreasonably harsh to North Carolina tenants who genuinely believe they are parties to an enforceable lease agreement. It also appears generous to North Carolina landlords who accept and receive the benefit of rent payments despite the nonexistence of a lease agreement, and who can instantly demand possession of the premises.
Kent v. Humphries: the Expansion of the Rights of a Tenant at Will
Because of the unique nature of tenancies at will, this issue is rarely before the courts. However, in 1981, the Court of Appeals of North Carolina issued an order regarding a case with similar facts. In Kent v. Humphries, a landlord and tenant were parties to a purported oral lease agreement for commercial real estate for a duration of five years. Due to its duration, the oral lease agreement was void and unenforceable. Unlike in Mauney, the tenant alleged a breach by the landlord. Specifically, the tenant alleged the landlord breached the parties’ agreement by operating a plastics plant at a nearby space, despite a promise to the contrary. The tenant alleged this promise was part of the oral agreement and operation of the plant caused physical and financial harm to the tenant’s person and business, eventually forcing her to vacate.
Apart from her breach of the lease claim, the tenant also sued the landlord for nuisance – or “an unreasonable interference with the use and enjoyment of [the tenant’s] property.” The tenant also brought claims for fraud and unfair and deceptive trade practices, which will not be addressed by this article. The Court of Appeals lamented that the tenant in Kent is a tenant at will and, as a result, the tenancy could be terminated instantly by an act constituting constructive eviction (such as the operation of the plastics plant). It further held that an effective eviction would not be “inconsistent with the very limited property rights [the tenant] held as a tenant at will.” Further, the court emphasized that most states treat a tenancy pursuant to a void lease agreement as a periodic tenancy or recognize that a tenancy at will is converted to a periodic tenancy upon payment and acceptance of rent. Despite the consensus, the court acknowledged it was restricted to the holding in Mauney – a tenancy at will cannot be converted to any other type of tenancy, even if the tenant pays rent and the payment is accepted by the landlord.
Despite the limitations placed on the Court of Appeals, the court recognized some property rights owned by a tenant at will, such as the right to support a nuisance claim. This property right exists “at least for the period for which [the landlord] accepted the rent[.]” In effect, this holding provides tenants at will a fixed property right in the leased premises for the duration of the period for which they have paid rent. Stated differently, a landlord to a tenant at will cannot accept rent payment for the month on October 1 and then terminate the lease, requiring the tenant to vacate, on October 15. Further, a landlord to a tenant at will cannot accept rent payment for the month of October and then engage in activities constituting a nuisance, interfering with the tenant’s use and enjoyment of the leased premises, on October 15. The tenant’s property rights exist and continue at least until the end of October.
The expansion of a tenant at will’s rights in Kent may not keep up with the consensus of other states, and the Court of Appeals’ request that the Supreme Court of North Carolina address the holding of Mauney remains unanswered: North Carolina is still in the minority of states that holds that a tenancy at will cannot be converted to another type of tenancy.
The burning question: is that the appropriate rule?
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