GEORGIA Sutherland Asbill & Brennan LLP R. … Sutherland Asbill & Brennan LLP James B. Jordan R....

Sutherland Asbill & Brennan LLP 1

GEORGIA

Sutherland Asbill & Brennan LLP James B. Jordan

R. Robinson Plowden

I. LANDLORD RIGHTS AND REMEDIES

A. Notice Requirements as Conditions to Exercise of Landlord’s Remedies 1. Notice of Dispossessory Proceeding

Unless required by the lease, a landlord is not required to provide notice, as such, prior to filing a dispossessory proceeding. However, the landlord must demand possession of the premises prior to commencing a dispossessory proceeding. Ga. Code Ann. § 44-7-50(a) (Supp. 2000). The demand for possession does not need to contain any special language as long as the landlord clearly demands that the tenant relinquish possession of the premises. Stephens v. Hous. Auth., 293 S.E.2d 53, 53 (Ga. Ct. App. 1982) (“[Ga. Code Ann. § 44-7-50] does not require that this demand be in any certain form . . . .”). The demand for possession may be written or oral. Sandifer v. Long Investors, Inc., 440 S.E.2d 479, 482 (Ga. Ct. App. 1994). Nevertheless, for evidentiary purposes, it is advisable that the demand for possession be given in writing. If the landlord seeks to dispossess the tenant due to holding over (including holding over beyond the term which has been terminated by the landlord due to the tenant’s default), the landlord must give the demand for possession upon or after termination of the lease but prior to commencement of the dispossessory proceeding. Trumpet v. Brown, 450 S.E.2d 316, 317 (Ga. Ct. App. 1994). If the landlord seeks to dispossess the tenant due to nonpayment of rent, the landlord must give the demand for possession after the due date of the rent but prior to commencement of the dispossessory proceeding. Metro Mgmt. Co. v. Parker, 278 S.E.2d 643, 647 (Ga. 1981). Dispossessory proceedings are discussed more fully in Section I.K below.

2. Notice in Other Contexts

Unless required by the lease, the landlord need not give the tenant notice prior to filing a suit for collection of rent. Helmken v. Flood, 75 S.E.2d 3, 4 (Ga. 1912). Nor is the landlord required to make any demand prior to instituting distress proceedings unless required by the lease. Alexander v. Holmes, 68 S.E.2d 242, 245 (Ga. Ct. App. 1951). Distress proceedings are discussed more fully in Section I.L below.


3. Recommended Course of Action Landlords often give tenants written notice prior to exercising a remedy, even

where no such notice is required. One advantage to giving such notice is that it provides a convenient time for giving the notice required by Georgia statute as a condition precedent to recovering attorney’s fees to the extent permitted by the lease. Recovery of attorney’s fees is discussed more fully in Section I.B.3 below.

B. Limitations on the Scope of Landlord’s Remedies for Tenant’s Failure to Pay

Rent 1. Recovery of Rent After Eviction

“Generally, when a landlord evicts a tenant and takes possession of the premises, the lease is terminated and the right to claim rent which accrues after eviction is extinguished.” Peterson v. P.C. Towers, L.P., 426 S.E.2d 243, 245 (Ga. Ct. App. 1992). However, “the ‘parties to a lease agreement may contract in advance to hold the lessee liable for rent even after an eviction, deducting therefrom only the amounts recovered by the lessor from reletting the premises . . . [if such an agreement is] premised on the existence of an explicit and detailed provision in the lease which clearly and unequivocally expressed the parties’ intention to hold the lessee responsible for after-accrued rent even should an eviction take place.’” Id. at 243 (quoting Bentley-Kessinger v. Jones, 367 S.E.2d 317 (Ga. Ct. App. 1988)). Accordingly, unless the lease expressly and clearly provides to the contrary, upon the issuance of a writ of possession, the tenant’s obligation to pay rent shall cease.

2. Recovery of Interest

Generally speaking, sums owed under contracts that do not specify an interest rate will bear interest at seven percent per annum from and after the due date. Ga. Code. Ann. § 44-7-16 (1991) (providing that unpaid rent shall bear interest); Ga. Code. Ann. § 7-4-2(a) (1997) (setting the legal rate of interest). Under Georgia usury limitations, if the lease does establish an interest rate applicable to late rent payments and the late rent installment is $3,000.00 or less, the interest rate shall not exceed sixteen percent per annum simple interest. Ga. Code Ann. § 7-4-2(a)(2) (1997). While there is no civil usury limitation as to sums in excess of $3,000.00, the criminal usury provisions of Georgia law limit interest to five percent per month. Ga. Code Ann. § 7-4-18(a) (Supp. 2001). 3. Recovery of Legal Fees

(a) Where the lease does not contain an obligation to pay fees


If the lease does not obligate the tenant to pay legal fees, the landlord typically cannot recover them. “The expenses of litigation generally shall not be allowed as part of the damages.” Ga. Code Ann. § 13-6-11 (Supp. 2001). However, in unusual circumstances where the defendant “has acted in bad faith, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense, the jury may allow [recovery of legal fees and expenses].” Ga. Code Ann. § 13-6-11 (Supp. 2001).

(b) Where the lease contains an obligation to pay fees

(1) Procedures for Recovery If a lease contains an express obligation to pay legal fees, Ga. Code Ann. § 13-1-11 establishes the procedures for recovery. Georgia Color Farms, Inc. v. K.K.L. Ltd. P’ship, 507 S.E.2d 817, 820 (Ga. Ct. App. 1998) (stating that a lease is “evidence of indebtedness” under Ga. Code Ann. § 13-1-11 and therefore falls within the ambit of the statute). Under Section 13-1-11(a)(3), the conditions precedent to recovery of contractual attorneys’ fees are: (1) the contract must include an obligation to pay attorneys’ fees; (2) the debt (e.g., rent obligation) must have matured; (3) written notice must be given to the debtor informing him that he has ten days from receipt of the notice to pay the debt in order to avoid attorneys’ fees; (4) the ten day period must expire without payment of the debt (and any interest thereon) in full; and (5) the debt must be collected by or through an attorney-at-law. Ga. Code Ann. § 13-1-11(a)(3) (1982). (2) Statutory Attorney’s Fees If the landlord complies with Section 13-1-11 and the lease provides that the tenant will pay attorneys’ fees equal to a specified percentage of the amount owed, the percentage may not exceed fifteen percent. Ga. Code Ann. § 13-1-11(a)(1) (1982). If the landlord complies with Section 13-1-11 and the lease provides that the tenant will pay “reasonable attorneys’ fees” without specifying a percentage, the landlord is entitled to collect fifteen percent of the first $500.00 owed and ten percent of any sums over $500.00. Ga. Code Ann. § 13-1-11(a)(2) (1982). (3) Prevailing Party Attorney’s Fees Georgia courts have enforced lease provisions that entitle the “prevailing party” in an action to receive its “reasonable attorneys’ fees actually incurred.” See Georgia Color Farms, Inc. v. K.K.L.


Ltd. P’ship, 507 S.E.2d 817, 820 (Ga. Ct. App. 1998). We are not aware of any reported cases that analyze whether a party must comply with Section 13-1-11 to enforce such “prevailing party” language. Indeed, applying Section 13-1-11 to such a situation poses a practical problem about when to give the ten-day notice described in clause (4) of subparagraph (b)(1). The ten-day notice required by Section 13-1-11 contemplates a situation in which one party has a non-contingent obligation to pay a sum to another party. Thus, the ten-day notice serves to allow time to pay the non-contingent obligation without being obligated to pay legal fees. In contrast, the obligation to pay legal fees pursuant to “prevailing party” provisions typically is contingent upon a court entering judgment against one party. As a result, sending the ten-day notice before a judgment is entered would appear to be nothing more than a self-serving demand to admit all of the demanding party’s assertions in its pleadings; and sending the notice after judgment is entered would amount to a demand for a party to comply with the judgment. Both options appear awkward. Nevertheless, because we are not aware of any reported Georgia case addressing this issue, we recommend that a landlord comply with Section 13-1-11 in connection with “prevailing party” provisions. (4) Recommended Course of Action: Agreement to Avoid

Statutory Formula If the landlord desires to avoid the statutory formula set forth in Section 13-1-11(a)(1) and (3), the custom in Georgia is to require that the tenant pay “reasonable attorneys’ fees actually incurred” or words of similar import. Where a lease refers to “reasonable attorney’s fees actually incurred”, or similar words, it is believed that the party benefiting from such language will be entitled to collect the actual attorneys’ fees incurred so long as they are “reasonable,” regardless of whether the fees are higher or lower than the amount yielded by the application of the formula set forth in Section 13-1-11(a)(1) and (2). See, Rodgers v. First Union Nat’l Bank, 470 S.E.2d 246, 250 (Ga. Ct. App. 1996).

4. Recovery of Consequential Damages We are not aware of any reported Georgia cases that distinguish between

recovery of consequential damages in leases and recovery of consequential damages in general contracts not governed by the Uniform Commercial Code. Two statutes control the award of consequential damages in contracts. Section 13-6-2 provides that damages that are recoverable from a breach of contract must


“arise naturally and according to the usual course of things from such breach and such as the parties contemplated, when the contract was made, as the probable result of its breach.” The other statute provides that “[r]emote or consequential damages are not recoverable unless they can be traced solely to the breach of the contract or unless they are capable of exact computation, such as the profits which are the immediate fruit of the contract, and are independent of any collateral enterprise entered into in contemplation of the contract.” Ga. Code Ann. § 13-6-8 (1982). Thus, speculative damages are not permitted. Grossberg v. Judson Gilmore Assocs., Inc., 395 S.E.2d 592, 594 (Ga. Ct. App. 1990). (holding that lost profits were too speculative to permit recovery). However, “while mere speculation cannot support any damage award, all that is required is evidence from which damages can be established with reasonable certainty, and difficulty in fixing exact amounts should not preclude recovery.” CRS Sirrine, Inc. v. Dravo Corp., 464 S.E.2d 897, 900 (Ct. App. 1995).

C. Limitations on the Scope of Landlord’s Remedies for Tenant’s Defaults Other

Than Failure to Pay Rent

Other than the provisions discussed in Sections I.B.2, I.B.3 and I.B.4 above with respect to attorney’s fees, interest and consequential damages, we are not aware of any special restrictions on the scope of a landlord’s remedies for tenant defaults other than a failure to pay rent. A non-monetary default by a tenant usually gives the landlord the right to pursue the same remedies as are applicable in the case of a failure to pay rent.

D. Duty to Mitigate

1. No General Duty Generally, a landlord is not required to mitigate damages caused by a tenant’s lease default. Lamb v. Decatur Fed. Sav. & Loan Ass’n, 411 S.E.2d 527, 530 (Ga. Ct. App. 1991). 2. Exceptions to General Rule There are two important exceptions to this general rule. First, the parties to a lease may contractually require mitigation. Second, if the lease is terminated, “the landlord is required to make reasonable efforts to re-lease the premises and mitigate his damages.” Georgia Color Farms v. K.K.L., Ltd. P’ship, 507 S.E.2d 817, 818 n.1 (Ga. Ct. App. 1998). This second exception presumably does not apply where the landlord terminates the tenant’s right of possession only without terminating the lease.


3. Recommended Course of Action Because the landlord has a duty to mitigate damages once the lease terminates, the landlord should carefully consider its election of remedies (i.e., consider terminating the tenant’s right of possession only) and its response to a tenant abandoning the premises. If the landlord accepts surrender of the premises, the lease terminates as a matter of Georgia law. Lamb v. Decatur Fed. Sav. & Loan Ass’n, 411 S.E.2d 527, 530 (Ga. Ct. App. 1991). Therefore, if the landlord desires to avoid an obligation to mitigate its damages, the landlord should consider leaving the lease in force by not accepting surrender. The Georgia Court of Appeals has held that “’[t]here must be either an express agreement to the surrender of possession on the part of the tenant, or such circumstances as compel that the landlord consented to retake possession of his property.’” Vaswani v. Wohletz, 396 S.E.2d 593, 595 (Ga. Ct. App. 1990) (quoting Jenkins v. Smith, 88 S.E.2d 533 (Ga. Ct. App. 1955)). It is not clear what constitutes acceptance of surrender under Georgia law because that determination depends upon the surrounding facts and circumstances. A landlord may wish to consider including language in the lease addressing surrender (e.g., language to the effect that there shall not be an acceptance of surrender in the absence of a written agreement signed by a duly appointed agent of the landlord).

E. Landlord’s Ability to Recover Rent

1. Past Due Rent

A landlord may recover delinquent rent from a tenant by filing a civil action based on breach of contract rather than resorting to a special statutory procedure and seeking to regain possession of the premises. See, Maolud v. Keller, 278 S.E.2d 80, 81 (Ga. Ct. App. 1981). In an eviction proceeding, the landlord may also recover a judgment for all past due rents, Ga. Code Ann. § 44-7-55(a) (Supp. 2001), provided the tenant is personally served in connection with the dispossessory proceeding (see Section I.K.3(d) below) or the landlord uses “tack and mail” service (see Section I.K.3(d) below) and the tenant answers in response to the “tack and mail” service. See Hous. Auth. v. Hudson, 296 S.E.2d 558, 559-60 (Ga. 1982). However, if the landlord uses “tack and mail” service and the tenant does not answer, the landlord is not entitled to a personal judgment for unpaid rents or damages. Hous. Auth. v. Hudson, 290 S.E.2d 558, 560 (Ga. 1982).

2. Rent Acceleration Provisions

(a) Limited Ability to Accelerate


Upon a tenant default, subject to the limitations described in this section, a landlord may accelerate rent for the balance of the lease term, but only if the lease contains an express acceleration clause. See, e.g., Kasum Communications, Inc. v. CPI N. Druid Co., 217 S.E.2d 492, 493 (Ga. Ct. App. 1975). Georgia courts view rent acceleration clauses as liquidated damages provisions. See, e.g., Peterson v. P.C. Towers, L.P., 426 S.E.2d 243, 245 (Ga. Ct. App. 1992). Therefore, to be enforceable, a rent acceleration clause must satisfy the three-part test set forth in Southeastern Land Fund, Inc. v. Real Estate World, Inc., 227 S.E.2d 340 (Ga. 1976). Peterson, 426 S.E.2d at 246. “First, the injury caused by the breach must be difficult or impossible of accurate estimation; second, the parties must intend to provide for damages rather than for a penalty; and third, the sum stipulated must be a reasonable pre-estimate of the probable loss.” Southeastern Land Fund, 227 S.E.2d at 343. In Peterson, the court did not enforce the rent acceleration clause because the clause purported to provide the landlord possession of the premises and a lump sum award of future rent (reduced to present value) without any attempt to reasonable pre-estimate the amount of the landlord’s loss by taking into account the future rental value of the premises and the likelihood of reletting. Peterson, 426 S.E.2d at 246.

(b) Caution Relating to Enforceability

We caution landlords about the potential unenforceability of rent acceleration clauses. We believe that any rent acceleration provision which allows the landlord to collect the entire future rent without reducing such sum to present value or without deducting from such sum the present value of the future rental value of the premises during the remaining term of the lease is of dubious enforceability. See Mullis v. Shaheen, 456 S.E.2d 764, 765 (Ga. Ct. App. 1995). Therefore, we recommend that landlords draft their rent acceleration provisions to (i) include the liquidated damage type language referenced in Southeastern Land Fund above; (ii) reduce the accelerated rent to present value; and (iii) deduct from the present value of the accelerated rent the present value of the reasonable rental value for the premises for the remainder of the lease term. This contractual approach to rent acceleration is consistent with reported Georgia case authority as to damages referenced in Section I.E.3 below. See Piggly Wiggly S., Inc. v. Eastgate Assocs., Inc., 392 S.E.2d 337, 339 (Ga. Ct. App. 1990) (“[T]he proper measure of damages to be applied is the excess of the rent reserved under the lease agreement over the reasonable rental value of the premises at the time of the breach.”).

3. Landlord’s Right to Collect Future Rent

(a) No General Right to Recover


If the landlord evicts the tenant or terminates the lease, the landlord’s right to future rent is normally extinguished. Mullis v. Shaheen, 456 S.E.2d 764, 765 (Ga. Ct. App. 1995). (b) Exceptions to General Rule However, “the parties to a lease agreement may contract in advance to hold the lessee liable for rent even after an eviction.” Id. To do so, however, the landlord must rely upon “an explicit and detailed provision in the lease which clearly and unequivocally” expresses the parties intent. Bentley-Kessinger, Inc. v. Jones, 367 S.E.2d 317, 318 (Ga. Ct. App. 1988) (containing an example of language that is not explicit and detailed); Hardin v. Macon Mall, 315 S.E.2d 4, 6 (Ga. Ct. App. 1984) (containing an example of language that was enforceable).

(1) Examples When Landlord Evicts Georgia courts have endorsed two types of lease provisions that permit the recovery of future rents when the landlord evicts the tenant. In Hardin, the court enforced a lease provision that permitted the landlord to recover each month the deficiency between (i) the amount due that month; and (ii) the amount collected for that month. Hardin, 315 S.E.2d at 6. The Mullis court enforced the second type of lease provision which permitted the landlord to accelerate “the worth at the time of termination of the difference between the rent under the lease and that for which the premises were relet, if any, for the remainder of the lease term.” Mullis, 456 S.E.2d at 765. This lease provision is consistent with the type of lease provision described in Section I.E.2(b) above. (2) Examples When Tenant Has Abandoned Premises

In cases where the landlord does not need to evict the tenant because the tenant has abandoned the premises, the landlord has two methods to recover future rent. The landlord may accept the abandonment and sue at once for “the excess of the rent reserved under the lease agreement over the reasonable rental value of the premises at the time of the breach.” Piggly Wiggly S., Inc. v. Eastgate Assocs., Inc., 392 S.E.2d 337, 339 (Ga. Ct. App. 1990). Alternatively, the landlord may elect not to accept the abandonment and to treat the lease as remaining in full force and effect, in which event the landlord may (i) permit the premises to remain vacant while collecting the agreed upon rent from the


original tenant, or (ii) obtain another tenant while holding the original tenant liable for any deficiency that may occur. Crolley v. Crow-Childress-Mobley #3, 379 S.E.2d 202, 204 (Ga. Ct. App. 1989); Love v. McDevitt, 152 S.E.2d 705, 706 (Ga. Ct. App. 1966).

4. Rent Accruing Subsequent to Filing

In a statutory eviction proceeding, the landlord is entitled to all rent that is due.

Ga. Code Ann. § 44-7-50(a) (Supp. 2001). In a civil action to recover rents, however, “[e]ach installment under a [lease] contract constitutes a different cause of action on which an action can be brought, even though all are provided in the same contract.” Dwyer v. Anand, 436 S.E.2d 532, 533 (Ga. Ct. App. 1993). “In order to recover rents that become due after commencement of an action seeking rents that are already past due, a plaintiff must amend his original complaint under [Ga. Code Ann.] § 9-11-15(a), supplement his pleadings under [Ga. Code Ann.] § 9-11-15(d), or try the additional issues with the express or implied consent of the other party in accordance with [Ga. Code Ann.] § 9-11-15(b).” Id. In the alternative, once the issue of liability has been established judicially, the landlord should be entitled to initiate successive suits in the future to obtain the actual amount of damages suffered by the landlord on account of such prior default.

F. Landlord’s Ability to Seek Specific Performance

In general, a landlord may seek specific performance of a lease. See, e.g., Smith v. Top Dollar Stores, Inc., 198 S.E.2d 690 (Ga. Ct. App. 1973). We note, however, that while we are not aware of any reported Georgia cases addressing the specific performance of tenant opening or operating covenants in leases, Georgia courts may be reluctant to require specific performance of such covenants because of the difficulties posed by judicial supervision or other reasons. There do not appear to be any special rules governing the application of specific performance to a lease. Instead, the statutes and case law pertaining generally to specific performance would appear to apply. Ga. Code Ann. § 23-2-130 provides that “[s]pecific performance of a contract, if within the power of the party, will be decreed, generally, whenever damages recoverable at law would not be an adequate compensation for nonperformance.” Other standards imposed by equity also apply. For example, a party seeking specific performance must show substantial compliance with his part of the agreement. Pope v. Cole, 156 S.E.2d 36 (Ga. 1967).


G. Restrictions on Landlord’s Ability to Recover Default Interest

Default interest is subject to Georgia’s usury statute. Under that statute, if the lease does establish an interest rate applicable to late rent payments and the late rent installment is $3,000.00 or less, the default interest rate shall not exceed sixteen percent per annum simple interest. Ga. Code Ann. § 7-4-2(a)(2) (1997). While there is no civil usury limitation as to sums in excess of $3,000.00, the criminal usury provisions of Georgia law limit interest to five percent per month. Ga. Code Ann. § 7-4-18(a) (Supp. 2001). (See Section I.B.2 above) Generally speaking, sums owed under contracts that do not specify an interest rate will bear interest at seven percent per annum from and after the due date. Ga. Code. Ann. § 44-7-16 (1991) (providing that unpaid rent shall bear interest); Ga. Code. Ann. § 7-4-2(a) (1997) (setting the legal rate of interest).

H. Restrictions on Landlord’s Ability to Recover Late Charges

Georgia law permits a landlord to assess a late charge against a tenant failing to

pay any sum in a timely manner so long as such late charge satisfies the three-part Southeastern Land Fund test described in Section I.E.2(a) above so as to avoid being deemed an unenforceable penalty. Oami v. Delk Interchange, Ltd., 388 S.E.2d 706, 707-08 (Ga. Ct. App. 1989) (enforcing late charge of $10.00 per day); Krupp Realty Co. v. Joel, 309 S.E.2d 641, 642-43 (Ga. Ct. App. 1983) (enforcing a flat $50.00 late charge). In both Oami and Delk, the court of appeals applied the Southeastern Land Fund test and determined that the applicable late charges were not unenforceable penalties because they represented a reasonable pre-estimate of the additional administrative, bookkeeping and clerical expenses resulting from the tenant’s late payment. Oami, 309 S.E.2d at 708; Krupp, 309 S.E.2d at 643. To increase the likelihood that a landlord’s reasonable late charge will satisfy the Southeastern Land Fund test, we recommend that the landlord insert language into the lease that provides that (1) landlord and tenant agree that such late charge is not intended as a penalty but is instead intended to compensate landlord for additional administrative charges and other damages incurred by landlord on account of such late payment; (2) landlord and tenant agree that the actual damages to be suffered by landlord in such event shall be difficult, if not impossible to ascertain; and (3) such late charge is a reasonable estimate of such charges and damages.

I. Limitations on Landlord’s Application of Tenant’s Security Deposit

For commercial leases, there are no special restrictions applicable to security deposits. A commercial landlord is not required to keep a security deposit in a special account. The landlord may commingle the security deposit with the landlord’s other funds. The landlord also is not required to pay interest on the


security deposit. See, William J. Dawkins, Georgia Landlord and Tenant Breach and Remedies § 3-1, at 37-38 (2d ed. 1990).

J. Landlord’s Ability to Engage in Self-Help Evictions

1. Lease May Permit Self-Help Evictions

If a commercial lease provides that the landlord may reenter and take possession of the premises without recourse to the Georgia summary eviction statute (Ga. Code Ann. § 44-7-50 et seq.), the landlord may do so if the landlord can accomplish the eviction without a “breach of the peace.” Rucker v. Wynn, 441 S.E.2d 417, 420 (Ga. Ct. App. 1994). Any other eviction must occur pursuant to the summary eviction statute discussed below. Swift Loan & Fin. Co. v. Duncan, 394 S.E.2d 356, 358 (Ga. Ct. App. 1990).

2. Caution Against Self-Help Evictions

We caution landlords about exercising self-help evictions because of the potential liability that doing so creates. If the landlord fails to proceed judicially, the landlord’s self-help actions will not be based upon a judicial acknowledgment of the tenant’s default, and the landlord may be exposed to material damages if the tenant has a technical or substantive defense to the default. Moreover, as a practical matter, a landlord may be viewed adversely by a court if the landlord is thought to have responded unreasonably or cavalierly or in a manner which is disproportionate to the default in question. A landlord that exercises non-judicial remedies can be subject to an action for trespass and other actionable torts, “even if the tenant is holding over beyond his term, is in arrears in his rent, and has received legal notice to vacate.” Swift, 394 S.E.2d at 358. In Swift the court affirmed the trial court’s ruling that the landlord was liable for trespass, abusive litigation and punitive damages where the landlord maliciously locked out the tenant without using the summary eviction statute. Even in Rucker, a case where the court upheld a landlord’s self-help eviction, we note that the trial court did not dismiss the tenant’s claim for conversion of personal property arising out of the landlord locking out the tenant. Rucker, 441 S.E.2d at 418-19. As the conversion claim did not reach the court of appeals, the disposition of the conversion claim is unknown.

K. Georgia Summary Eviction Statute

Georgia’s summary eviction proceedings are in Ga. Code Ann. § 44-7-50 et seq.

1. Landlord-Tenant Relationship

(a) Condition Precedent to Summary Eviction


In order for a landlord to commence proceedings under Ga. Code Ann. § 44-7-50 et seq., a landlord-tenant relationship must exist. Good Ol’ Days Commissary, Inc. v. Longcrier Family Ltd. P’ship I, 522 S.E.2d 249, 251 (Ga. Ct. App. 1999). For such a relationship to exist, it is not necessary that the landlord be the true owner of the property. It is sufficient for the landlord to have an enforceable lease contract with the tenant. Bridges v. City of Moultrie, 437 S.E.2d 368, 370 (Ga. Ct. App. 1993). Thus, a landlord-tenant relationship would exist if a party with a leasehold interest in certain property subleased the property to another party.

(b) Usufruct versus Estate for Years One unusual aspect of Georgia law is the concept of the usufruct, which is “the right simply to possess and enjoy the use” of real estate. Ga. Code Ann. § 44-7-1 (1991). Section 44-7-1 provides that “[t]he relationship of landlord and tenant is created when the owner of real estate” grants a usufruct. Id. That section also states that when the owner grants a usufruct, “no estate passes out of the landlord.” Id. Similarly, Section 44-6-101 provides that “[a]s applied to realty, an estate for years does not involve the relationship of landlord and tenant, in which relationship the tenant has no estate but merely has a right of use.” Ga. Code Ann. § 44-6-101 (1991). It is customary for commercial leases in Georgia to be denominated as usufructs. We are not aware of any reported Georgia cases that apply this statute to state that a landlord-tenant relationship does not exist for purposes of the Georgia summary eviction statute if an owner grants a leasehold estate as opposed to a usufruct. Instead, we believe that the dispossession remedy set forth in Section 44-7-50 et seq. should be available both to the landlord under the usufruct and the grantor under an estate for years. See William J. Dawkins, Georgia Landlord and Tenant Breach and Remedies § 5-1, at 52-53 (2d ed. 1990). Nevertheless, out of an abundance of caution, one may wish to consider inserting into a lease creating an estate for years rather than a usufruct language that provides that a landlord-tenant relationship exists for purposes of, and the landlord may exercise the remedies set forth in, Section 44-7-50 et seq.

2. Grounds for Dispossession

Under the summary eviction statute, there are three grounds for dispossession: (a) the tenant is holding over; (b) the tenant failed to pay rent when due; or (c) the landlord desires possession of the premises held by a tenant at will or a tenant at sufferance. The first and third grounds


overlap because a tenant that is holding over is a tenant at sufferance and, under certain circumstances, may become a tenant at will. From a landlord’s perspective, the grounds for dispossession raise three key issues.

(a) Termination Clauses and Holding Over First, a tenant becomes a tenant holding over when the lease term expires by its terms as well as when the landlord terminates the lease because of a tenant default or another lease provision. Georgia courts have enforced lease provisions that permit a landlord to terminate a lease upon a tenant breach. See, e.g., RCH Corp. v. Southland Inv. Corp., 178 S.E.2d 766, 767 (Ga. Ct. App. 1970). However, such termination clauses must be specific. Pritchett v. King, 194 S.E. 44 (Ga. Ct. App. 1937).

(b) Sixty Day Notice to Tenant At Will Second, Georgia law requires a landlord to give sixty days notice before commencing eviction proceedings against a tenant at will, but does not require any notice before a landlord commences such proceedings against a tenant at sufferance. Ga. Code Ann. § 44-7-7 (1991). Absent an agreement to the contrary, a tenant will be a tenant at sufferance if it holds over without the acquiescence of the landlord. Carruth v. Carruth, 48 S.E.2d 387, 390 (Ga. Ct. App. 1948). However, “[i]t takes very little to convert a tenancy at sufferance into a tenancy at will. Receipt of rent, demand for rent, or anything that indicates the permission of the landlord for the tenant to remain in possession will have this effect.” Willis v. Harrell, 45 S.E. 794, 795-96 (Ga. 1903). We recommend that landlords who desire possession promptly demand possession while refusing to accept rent or otherwise recognize the tenant’s right even to possess the premises temporarily.

(c) Independent Grounds for Dispossession

Third, a landlord should recognize that each of the grounds for dispossession are independent. Thus, even if a tenant holding over has become a tenant at will, the landlord may commence eviction proceedings against the tenant without the necessity of terminating the tenancy by giving the statutory sixty day notice if the tenant has also failed to pay rent. However, if the landlord desires to repossess the premises and the tenant is a tenant at sufferance, we would advise a landlord to proceed based upon the first or third grounds for dispossession in order to prevent a tenant from tendering payment of rent pursuant to Ga. Code Ann. § 44-7-52, which constitutes a complete defense to an dispossessory action based upon nonpayment of rent. Ga. Code Ann. § 44-7-52 (Supp. 2001).


Note, however, that the landlord may draft the lease to provide that the tenant waives the right to tender payment pursuant to Ga. Code Ann. § 44-7-52. Hardwick, Cook & Co. v. 3379 Peachtree, Ltd., 363 S.E.2d 31, 33 (Ga. Ct. App. 1987).

3. Dispossession Procedures (a) Demand for Possession

The landlord’s first step in the summary eviction pursuant to Ga. Code Ann. § 44-7-50 et seq. is making a demand for possession. The demand need not contain any special language, as long as it is clear. Stephens v. Hous. Auth., 293 S.E.2d 53, 53 (Ga. Ct. App. 1982) (“[Ga. Code Ann. § 44-7-50] does not require that this demand be in any certain form . . . .”) If the landlord seeks to dispossess the tenant due to holding over, the landlord must give the demand notice upon or after termination of the lease but prior to commencement of the dispossessory proceeding. Trumpet v. Brown, 450 S.E.2d 316, 317 (Ga. Ct. App. 1994). If the landlord seeks to dispossess the tenant due to nonpayment of rent, landlord must give the demand notice after the due date of the rent but prior to commencement of the dispossessory proceeding. Metro Mgmt. Co. v. Parker, 278 S.E.2d 643, 647 (Ga. 1981). The demand may be written or oral. Sandifer v. Long Investors, Inc., 440 S.E.2d 479, 482 (Ga. Ct. App. 1994). However, for reasons of proof, it is always advisable that the notice be written.

(b) Landlord’s Affidavit

The second step in the summary eviction process is for the landlord, his agent or his attorney to make a sworn affidavit under oath to the facts. Ga. Code Ann. § 44-7-50(a) (Supp. 2001). The affidavit should clearly state the grounds for dispossession. If there are multiple grounds for dispossession (e.g., the tenant is holding over and has failed to pay rent), the affidavit should state them each “separately and positively” to be effective. Taylor v. Carver State Bank, 341 S.E.2d 502, 503 (Ga. Ct. App. 1986). The affidavit should not state the multiple grounds using “and/or” language, as that has been found to be too ambiguous to be effective. Id. The affidavit should also name the tenant with particularity, Russell v. O’Donnell, 208 S.E.2d 107, 108-09 (Ga. Ct. App. 1974) (stating that a trade name is adequate as long as it imports a legal entity and the name is corrected prior to judgment), describe the premises with enough specificity that the sheriff is able to identify the property, Taylor, 341 S.E.2d at 503, state that the tenant has refused the landlord’s demand for possession, allege any amounts due (including rent, interest and attorney’s fees) and pray for judgment in the amount so alleged. See, Ga. Code Ann.


§ 44-7-53(a) (Supp. 2001) (stating that if the tenant fails to answer landlord’s summons, the landlord is entitled to judgment by default for all rents due “as if ever item and paragraph in the affidavit” were supported by proper evidence). Typically, each court will have its own form Landlord’s Affidavit.

(c) Summons After the landlord makes the affidavit, the judge of the superior or state

court where the action arises, or the magistrate before whom the affidavit is made, must issue a summons to the sheriff or his deputy or any lawful constable of the county where the land lies. Ga. Code Ann. § 44-7-51(a) (1991). The summons must command the tenant to answer either orally or in writing within seven days from the date of the actual service unless the seventh day is a Saturday, a Sunday or a legal holiday, in which case the answer may be made on the next day that is not a Saturday, a Sunday or a legal holiday. Ga. Code Ann. § 44-7-51(b) (1991). Typically, each court will have its own form Summons.

(d) Service of Affidavit and Summons Pursuant to O.C.G.A § 44-7-51(a), the sheriff, deputy or lawful constable

must serve the affidavit and the summons on the tenant. That statute provides that if the sheriff, deputy or constable is unable to serve the defendant personally, service may be had by delivering the summons and the affidavit to any person who is sui juris residing on the premises or, after reasonable effort no such person is found residing on the premises, by posting a copy of the summons and the affidavit on the door of the premises and mailing a copy by first-class mail to the defendant’s last known address (so-called “tack and mail” service). Ga. Code Ann. § 44-7-51(a) (1991). In a commercial real estate case, the court of appeals has stated “tack and mail” service is permissible only where doing so is “reasonably calculated, under the circumstances, to afford notice”. Davis v. Hybrid Indus., Inc., 236 S.E.2d 854, 855 (Ga. Ct. App. 1977). In Davis, the court determined that “tack and mail” service was not adequate because the commercial tenant “did not reside at the premises, and it had a different corporate address as well as a registered agent for service of process.” Id. We note that if a landlord chooses to use “tack and mail” service, the court has only quasi-in-rem jurisdiction, Pelletier v. Northbrook Garden Apartments, 210 S.E.2d 722, 724 (Ga. 1974). As a result, if the tenant fails to answer the “tack and mail” service, the court may not render a judgment for rent due. Hous. Auth. v. Hudson, 296 S.E.2d 558, 560 (Ga. 1982).


(e) Answer and Trial (1) If Tenant Fails to Answer

If the tenant fails to answer within the seven day period specified in the summons, the landlord is entitled to (a) a writ of possession instanter, and (b) a default judgment for all rents due as if each allegation in the affidavit were supported by proper evidence. Ga. Code Ann. § 44-7-53(a) (Supp. 2001). However, if the affidavit failed to demand or state the amount of rent due, the default judgment should be for a writ of possession and not a monetary judgment. Leverette v. Moran, 266 S.E.2d 574, 576 (Ga. Ct. App. 1980).

(2) If Tenant Answers

If the tenant answers within the seven day period, the matter proceeds to trial. Pending the final outcome of the litigation, if the tenant desires to remain in possession of the premises, Ga. Code Ann. § 44-7-53(b) requires the tenant to pay rent into the registry of the court pursuant to Ga. Code Ann. § 44-7-54 “at the time of his answer.” However, cases construing Ga. Code Ann. § 44-7-54 indicate that the tenant must pay rent into the registry where the issue of the right of possession cannot be finally determined within two weeks from the date of service of the summons and affidavit. See Lamb v. Hous. Auth., 247 S.E.2d 597, 599 (Ga. Ct. App. 1978). (3) Practical Considerations While there are no statutory procedures that apply to expedite trial once the trial commences, typically a proceeding under the summary eviction statute occurs on a faster track than ordinary lawsuits. In addition, the summary eviction statute does not place any limitations on the size of a judgment that the court may render.

L. Landlord’s Lien

1. Generally

A landlord in Georgia has no common law lien or right to retain a tenant’s property. Messmore v. Roth, 366 S.E.2d 318, 320 (Ga. Ct. App. 1988). Ga. Code Ann. § 44-14-341 gives a landlord a general lien on the tenant’s property that is subject to levy and sale. The method for enforcing this lien is a distress proceeding pursuant to Ga. Code Ann. § 44-7-70 et seq. This lien is inferior to


liens for taxes and to the general and special liens of laborers, and ranks with other liens according to date. The relative priority of the landlord’s lien vis-a-vis all other liens is determined by reference to the dates of the respective liens so that earlier liens have priority over subsequent liens. For this purpose, the date of this lien is the “time of levying a distress warrant.” Ga. Code Ann. § 44-14-342 (1982). Thus, unlike landlord liens in other jurisdictions, the landlord’s lien does not benefit from any “super priority” over, for example, financing liens.

2. Landlord-Tenant Relationship The distraint statute is similar to the summary eviction statute because a landlord-

tenant relationship must exist before the statute applies. Arnold v. Selman, 62 S.E.2d 919, 920 (Ga. Ct. App. 1951). Issues pertaining to the landlord-tenant relationship are discussed above in Section I.K.1 in connection with the summary eviction statute.

As in the dispossession context, we are not aware of any reported Georgia cases that apply Ga. Code Ann. § 44-7-1 (1991) or Ga. Code Ann. § 44-6-101 (1991) to state that a landlord-tenant relationship does not exist for purposes of the Georgia summary distraint statute if an owner grants a leasehold estate as opposed to a usufruct. Instead, we believe that the summary distraint remedy set forth in Ga. Code Ann. § 44-7-70 et seq. is available both to the landlord under the usufruct and the grantor under an estate for years. See William J. Dawkins, Georgia Landlord and Tenant Breach and Remedies § 6-2, at 144 (2d ed. 1990).

3. Grounds for Distraint At first blush, the two statutes setting forth the grounds for distraint appear

inconsistent. Ga. Code Ann. § 44-7-70 provides that the landlord “shall have the power to distrain for rent as soon as the same is due if the tenant is seeking to remove his property from the premises.” In contrast, Ga. Code Ann. § 44-7-71 provides that the landlord may apply for a distress warrant “[w]hen rent is due or the tenant is seeking to remove his property” (emphasis added). The Georgia Court of Appeals has explained and reconciled these two statutes in D. Jack Davis Corp. v. Karp, 333 S.E.2d 685, 687 n.1 (Ga. Ct. App. 1985). In that case, the court stated that “Section [44-7-70] gives the landlord the power to distrain, i.e., levy or seize the tenant’s property.” In contrast, Section 44-7-71 is procedural in nature and “merely allows the landlord to begin the distraint process, by application, even if the rent is not yet due but the tenant is seeking to remove his property, so that by the time the rent is due and not paid, the levy can proceed.” D. Jack Davis Corp. v. Karp, 333 S.E.2d 685, 687 n.1 (Ga. Ct. App. 1985). In other words, a landlord may commence a distraint proceeding under Section 44-7-71 when the tenant either fails to pay rent when due or seeks to remove property from the premises. But, the landlord may not complete the distraint process and cause the local governmental authorities (e.g., the sheriff) to effect the levy


against the tenant’s property until the tenant has both failed to pay rent when due and is seeking to remove the property from the premises. In this way, the two statutes work together: while in inverse order in the statute, Section 44-7-71 provides the procedural basis for distraint proceedings (but provides no substantive basis for enforcing the lien) and Section 44-7-70 provides the power to enforce the lien established pursuant to the procedures set forth in Section 44-7-71.

4. Distraint Procedure

(1) Landlord’s Affidavit

The first step in a distress proceeding is for the landlord, his agent or his attorney to make a sworn affidavit under oath as to the facts. Ga. Code Ann. § 44-7-71 (1991). The affidavit should clearly state the grounds for issuance (i.e., that rent is due or that the tenant is seeking to remove his property from the premises). The affidavit should also name the tenant with particularity, see Russell v. O’Donnell, 208 S.E.2d 107, 108-09 (Ga. Ct. App. 1974) (stating that a trade name in a dispossessory proceeding is adequate as long as it imports a legal entity and the name is corrected prior to judgment), describe the premises with enough specificity that the sheriff is able to identify the property, see Jackson v. Oliphant, 76 S.E.2d 625, 625 (Ga. Ct. App. 1953), and state either that the tenant resides in the county where application is made or the tenant has property in that county. See Kimball Co. v. Rodgers, 93 S.E. 32, 32 (Ga. Ct. App. 1917). The statute does not specifically require that the affidavit state the amount of rent due. However, case law interpreting the predecessor statute holds that the amount should be so stated. Cornwell v. Leverette, 56 S.E. 300, 301 (Ga. 1906). In addition, Ga. Code Ann. § 44-7-74 permits a default judgment “as if every item and paragraph in the affidavit . . . were supported by proper evidence.” Therefore, we recommend that the affidavit set forth the amounts due. Typically, each court will have its own form of Landlord’s Affidavit.

(2) Summons After the landlord makes the affidavit, the judge of the superior or state

court where the action arises, or the magistrate before whom the affidavit is made, must issue a summons to the sheriff, deputy or marshal of the county where the tenant resides or where his property may be found. Ga. Code Ann. § 44-7-72 (1991). The summons must command the tenant to appear at a hearing on a day certain not less than five nor more than seven days from the date of the actual service. Ga. Code Ann. § 44-7-72 (1991). Typically, each court will have its own form of Summons.


(3) Service of Affidavit and Summons Pursuant to Ga. Code Ann. § 44-7-72, the sheriff, deputy or marshal must

serve the affidavit and the summons on the tenant. That statute provides that if the sheriff, deputy or marshal is unable to serve the defendant personally, service may be had by delivering the summons and the affidavit to any person who is sui juris residing on the premises or, after reasonable effort no such person is found residing on the premises. Ga. Code Ann. § 44-7-72 (1991). Unlike the eviction statute, the distraint statute does not permit “tack and mail” service. Once the summons is served, Ga. Code Ann. § 44-7-75 prohibits the tenant from transferring, conveying, removing or concealing his property without either posting a bond pursuant to Ga. Code Ann. § 44-7-76 or complying with Ga. Code Ann. § 44-7-75(a) and (b), which require the tenant to pay rent in the registry of the court. Ga. Code Ann. § 44-7-75(d) (1991).

(4) Answer and Trial (a) If Tenant Fails to Answer

If the tenant fails to answer within the specified period specified in the summons, and the requirements of Section 44-7-70 (See Section I.L.3 above) have been met, the landlord is entitled to (a) a distress warrant, and (b) a default judgment for all rents due as if each allegation in the affidavit were supported by proper evidence. Ga. Code Ann. § 44-7-74 (1991). As stated above, while a landlord may file a distress proceeding under Ga. Code Ann. § 44-7-71 when rent is due or when the tenant seeks to remove its property, Section 44-7-70 provides for levy only when rent is due and the tenant is seeking to remove its personal property. (b) If Tenant Answers

If the tenant answers within the specified period, the matter

proceeds to trial. Pending the final outcome of the litigation, if the tenant desires to remain in possession of the property subject to the distress proceeding, Ga. Code Ann. § 44-7-75 requires the tenant to pay into the registry of the court at the time of the tenant’s answer “all rent admittedly owed prior to the issuance of the summons.” Ga. Code Ann. § 44-7-75(a) (1991). If that amount is disputed, the court may determine the amount to be paid into the registry. Ga. Code Ann. § 44-7-75(b) (1991). The tenant must also pay into the registry all rent coming due after the date of the issuance of the summons. Id. If that amount is disputed, either party can present a written lease to establish the amount to be paid


and, absent such a written agreement, the court shall require the amount to be paid to be equal to the last rental payment paid by the tenant and accepted by the landlord. Id. If the landlord is also seeking a dispossessory warrant (discussed above), the sums paid pursuant to Ga. Code Ann. § 44-7-54 will satisfy the requirements of Ga. Code Ann. § 44-7-75 relating to payment into the registry. Ga. Code Ann. § 44-7-75(c) (1991)

(5) Tender of Payment Ga. Code Ann. § 44-7-73 states that “the tenant shall be allowed to tender

to landlord, within seven days of the day the tenant was served with the summons . . . all rents allegedly owed plus the cost of the distress warrant.” Ga. Code Ann. § 44-7-73 (1991). Such a tender is a complete defense to the distress proceeding. Ga. Code Ann. § 44-7-73. This statute does not clearly state that such tender also obviates the need to file an answer. Therefore, a cautious tenant will also file an answer alleging such tender as its defense. Presumably, a landlord may draft the lease to provide that the tenant waives the right to tender payment pursuant to Ga. Code Ann. § 44-7-73. See Hardwick, Cook & Co. v. 3379 Peachtree, Ltd., 363 S.E.2d 31, 33 (Ga. Ct. App. 1987) (permitting waiver of right to tender in a dispossession case).

(6) Not Widely Used The statutory distress proceeding is not widely used in Georgia. William

J. Dawkins, Georgia Landlord and Tenant Breach and Remedies § 6-1, at 141 (2d ed. 1990). It is not commonly used for at least two reasons. First, the distress proceeding does not create a “super priority” lien that is superior to, for example, liens for financing. Accordingly, if the tenant's personal property is encumbered, the distress proceeding will be of little assistance to a landlord. Second, unlike an earlier version of the statute, the current distraint statute affords the tenant notice and a hearing before the landlord can seize or levy against the tenant's property. Id.

M. Special Rules for Landlords and Tenants in Context of UCC Consensual Lien There are no special rules. N. Election of Remedies

State requirements for election of remedies should not affect the landlord’s ability to pursue remedies against a defaulting tenant. “The Civil Practice Act provides that a claimant may pursue any number of consistent or inconsistent remedies


without the necessity of having to make an election.” Eric James Hertz & Mark G. Bergethon, Georgia Law of Damages § 12-3 at 181 (2000); See Ga. Code Ann. § 9-11-18.


II. TENANT RIGHTS AND REMEDIES

A. Warranty of Quiet Enjoyment

1. Implied in Leases

“A covenant for quiet enjoyment of the premises is necessarily implied in every lease . . . .” Dwyer v. McCoy, 512 S.E.2d 70, 73 (Ga. Ct. App. 1999) (quoting Adair v. Allen, 89 S.E. 1099 (Ga. Ct. App. 1916)). We are not aware of any reported Georgia cases that address whether this implied covenant can be waived expressly in the lease. However, since Georgia courts recognize the freedom of contract principle and generally interpret contractual provisions literally, particularly in commercial transactions, Vaswani v. Whohletz, 396 S.E.2d 593, 594 (Ga. Ct. App. 1990), we see no reason why a Georgia court would not enforce such a waiver of the warranty of quiet enjoyment. In addition, we would expect that a court would enforce a lease provision expressly limiting the warranty of quiet enjoyment (e.g., a "limited" warranty of quiet enjoyment where the landlord limits the warranty to claims of parties claiming by, through or under landlord).

2. Breach of Warranty of Quiet Enjoyment

Georgia courts have recognized a breach of the covenant of quiet enjoyment in two types of situations.

(a) Paramount Title

First, a court may find a breach of the covenant if the tenant is evicted or cannot enjoy the full length of its lease term because the landlord did not have good title to the property or did not have the authority to lease the property for the term set forth in the lease. Dwyer v. McCoy, 512 S.E.2d 70, 73 (Ga. Ct. App. 1999). In Dwyer, the landlord breached the covenant because (i) the landlord held only a life estate in the property and died before the lease term expired, (ii) the tenant did not have actual knowledge that the landlord had only a life estate, and (iii) the actual owner of the property permitted the tenant to remain on a month-to-month basis, but would not allow the tenant to enjoy the remaining years of its ten-year lease. Id.

(b) Constructive Eviction

The second situation in which Georgia courts have recognized a breach of the covenant of quiet enjoyment is where the tenant is constructively evicted by the landlord’s actions. See Smith v. Hightower, 55 S.E.2d 872,


875 (Ga. Ct. App. 1949). Constructive eviction is discussed in Section II.B below.

(c) Special Circumstances Where Covenant is Not Breached

(1) Act of Third Parties The implied covenant of quiet enjoyment does not protect the tenant against the acts of third parties that disturb the tenant, unless it can be shown that the landlord authorized or is responsible for the disturbance. See Parker v. Munn Sign & Advertising Co., 29 Ga. App. 420, 420 (1922). (2) Other Disturbances or Disruptions of Tenant’s Use and

Occupancy Georgia cases do not clearly state whether a breach of the covenant of quiet enjoyment will exist if the landlord disturbs the tenant’s occupancy, but the disturbance is not so material as to result in failure of landlord's title or constructive eviction. 19 Encyclopedia of Georgia Law § 40 at 277 (1993). One case suggests that constructive eviction is not required because the court determined that a landlord had breached the implied covenant by maliciously removing the door to the premises, without analyzing whether the tenant was constructively evicted. See Albert Properties, Inc. v. Watkins, 237 S.E.2d 670, 671-72 (Ga. Ct. App. 1977). However, another case indicates that constructive eviction may be required. See Hardwick, Cook & Co. v. 3379 Peachtree, Ltd., 363 S.E.2d 31, 34 (Ga. Ct. App. 1987) (upholding a court’s grant of summary judgment against a tenant alleging a breach of the implied covenant of quiet enjoyment in part because “it is uncontroverted that [the tenant] continued its occupancy and its business during the renovation activity of landlord and nothing in the record indicates a constructive eviction”). We are not aware of any reported Georgia cases addressing whether matters interfering with tenant's use of its premises such as disruptive noise or odors constitute a breach of the warranty of quiet enjoyment.

(d) Tenant’s Remedies for Breach of the Covenant of Quiet

Enjoyment

If a landlord breaches the covenant of quiet enjoyment, the tenant may seek to enjoin the landlord’s acts. Eric James Hertz & Mark G. Bergethon, Georgia Law of Damages § 23-1 at 181 (2000). Alternatively, the breach may be the basis for a suit for monetary damages or, if the


landlord’s actions amount to “an intentional disregard” of the tenant’s rights, punitive damages. Albert Properties, Inc. v. Watkins, 237 S.E.2d 670, 671-72 (Ga. Ct. App. 1977)

B. Constructive Eviction

1. Tenant’s Remedy

Constructive eviction, when present, serves to rescind the lease and relieve the tenant of the obligation to pay rent. Piano & Organ Ctr., Inc. v. Southland Bonded Warehouse, Inc., 228 S.E.2d 615, 617 (Ga. Ct. App. 1976); Johnson v. Watkins, 26 Ga. App. 759, 759 (1921).

2. Constructive Eviction Due to Failure to Repair

The classic constructive eviction situation is comprised of three elements (a) the landlord as a consequence of his failure to keep the rented premises repaired, allows the premises to become an unfit place for the tenant, who is physically occupying the premises, to carry on the business for which the premises was rented, (b) the premises cannot be restored to a fit condition by ordinary repairs which can be made without unreasonable interruption of the tenant’s business, and (c) the tenant vacates the premises. Piano & Organ Ctr., Inc. v. Southland Bonded Warehouse, Inc., 228 S.E.2d 615, 617 (Ga. Ct. App. 1976). An example of this type of constructive eviction involves a landlord that made no attempt to repair a leak in an exterior wall, which resulted in the subject premises flooding with every rainfall. Id.

3. Constructive Evictions Due to Other Causes

“Constructive eviction can occur under circumstances other than when the premises have been allowed to deteriorate to the point of unfitness.” Sunamerica Fin., Inc. v. 260 Peachtree St., Inc., 415 S.E.2d 677, 681 (Ga. Ct. App. 1992), rev’d in part on other grounds, Atlanta Mkt. Ctr. Mgmt. v. McLane, 503 S.E.2d 284 (Ga. 1998). For this constructive eviction to occur in this manner, the tenant must vacate the premises as a result of the landlord acting or failing to act in a “grave and permanent” manner with the intention of depriving the tenant of the enjoyment of the premises. Id. An example of this type of breach involves a tenant that vacated the premises because the landlord failed to cause an elevator critical to a tenant’s operations to comply with applicable codes in a timely manner despite receiving warnings that governmental authorities would lock all non-compliant elevators. Magnolia Warehouses v. Morton Realty Co., 117 S.E.2d 552, 553-54 (Ga. Ct. App. 1960).


4. Special Issues Relating to Constructive Eviction (a) Must Result from Landlord’s Acts Constructive eviction can exist only if it results from the landlord’s acts.

“[A]cts of another tenant . . . cannot amount to a constructive eviction.” Rains Inv. Co. v. George Roe & Assocs, Inc., 231 S.E.2d 460, 461 (Ga. Ct. App. 1976).

(b) Must Not Be Merely Uncomfortable

In order for constructive eviction to apply, “there must be some grave act of a permanent character done by the landlord.” Alston v. Georgia Credit Counsel, Inc., 232 S.E.2d 134, 135 (Ga. Ct. App. 1976). It is not sufficient for the premises to be merely “uncomfortable.” Sunamerica Fin., Inc., v. 260 Peachtree St., Inc., 415 S.E.2d 677, 681 (Ga. Ct. App. 1992), rev’d in part on other grounds, Atlanta Mkt. Ctr. Mgmt. v. McLane, 503 S.E.2d 284 (Ga. 1998). Accordingly, the Georgia Court of Appeals reversed a trial court’s finding that a tenant was constructively evicted where the air conditioning serving the premises was inoperable for three days and, at other times, the air conditioning and heating did not meet the tenant’s comfort standards. Alston, 232 S.E.2d at 135.

C. Tenant’s Offset Rights

1. Repair and Deduct

Absent lease language to the contrary, a tenant does not have a right of offset, except in certain limited circumstances referred to as “repair and deduct.” The repair and deduct remedy applies where the landlord has failed to make a required repair after a reasonable time has elapsed after notice. Borochoff Props., Inc. v. Creative Printing Enters., Inc., 210 S.E.2d 809, 810 (Ga. 1974). What constitutes a “reasonable time,” of course, depends on all surrounding facts and circumstances. Once the tenant makes the repairs, the tenant may offset the reasonable cost of the repairs against rent. Johns v. Gibson, 4 S.E.2d 480, 481 (Ga. Ct. App. 1939). As a practical matter, the offset may be accomplished by tendering to the landlord repair receipts instead of rent. William J. Dawkins, Georgia Landlord and Tenant Breach and Remedies § 2-7, at 17 (2d ed. 1990).

2. Offset May Be Waived

The Georgia Court of Appeals has held that the parties to a commercial lease may waive the repair and deduct remedy. Hardwick, Cook & Co. v. 3379 Peachtree, Ltd., 363 S.E.2d 31, 33 (Ga. Ct. App. 1987). In Hardwick the court enforced general language in the lease that provided that rent “shall be paid without


deduction or offset.” Id. As a result, the tenant in Hardwick could not deduct amounts allegedly owed by the landlord to the tenant. Id.

D. Tenant’s Remedies for Landlord’s Default In addition to the “repair and deduct” remedy discussed above, a tenant may sue a

landlord. The lawsuit might be a contract action, or, in some instances, a tort action or equitable relief (subject to the limitations described below).

1. Contract Damages A tenant may bring an action for breach of contract against a defaulting landlord.

See, e.g., Atlanta Baggage & Cab Co. v. Loftin, 76 S.E.2d 92 (Ga. Ct. App. 1953). “Damages recoverable for a breach of contract are such as arise naturally and according to the usual course of things from such breach and such as the parties contemplated, when the contract was made, as the probable result of its breach.” Ga. Code Ann. § 13-6-2 (1982). “The measure of damages for the breach of a lease by the lessor is the difference between the rental price agreed upon and the actual value of the premises at the time of the breach.” Strickland v. Flournoy, 97 S.E.2d 638, 638 (Ga. Ct. App. 1957). Punitive damages are not recoverable for mere breach of contract. Bennett v. Associated Food Stores, 165 S.E.2d 581, 585 (Ga. Ct. App. 1968).

2. Tort Damages In theory, under limited circumstances, a tenant might also bring a tort action

against a defaulting landlord. “Generally, a mere breach of a valid contract amounting to no more than a failure to perform in accordance with its terms does not constitute a tort . . . .” Mauldin v. Sheffer, 150 S.E.2d 150, 153 (Ga. Ct. App. 1966). However, “if a contract imposes a legal duty upon a party thereto, which duty exists apart from the specific obligation of the contract, the neglect of that duty is a tort founded upon a contract.” Id. Absent a lease provision to the contrary, Georgia law obligates the landlord to maintain the premises. Ga. Code Ann. § 44-7-13 (1991). Therefore, if a landlord fails to maintain the premises and the lease does not shift this maintenance obligation to the tenant, a tenant might be able to sue the landlord in tort. Damages in a tort action “may be either general or special, direct or consequential.” Ga. Code Ann. § 51-12-1 (2000). Unlike a tenant suing for contract damages, a tenant that sues in tort might be able to recover punitive damages, see Stroud v. Elias, 275 S.E.2d 46, 48 (Ga. 1981), if there is “clear and convincing evidence” that the landlord’s actions constituted “willful misconduct, malice, fraud, wantonness, oppression, or that entire want of care which would raise the presumption of conscious indifference to the consequences.” Ga. Code Ann. § 51-12-5.1(b) (2000).


3. Equitable Relief A tenant may be able to obtain an injunction against a landlord that is physically

interfering with the tenant’s right of possession. Eric James Hertz & Mark G. Bergethon, Georgia Law of Damages § 23-1 at 364 (2000). In addition, if the landlord has caused or permitted a nuisance on the premises, the tenant may obtain injunctive relief. Id. Ga. Code Ann. § 41-1-1 et seq. sets forth the substantive and procedural requirements relating to nuisance. Other types of relief such as declaratory actions should also be available to tenants. One situation in which specific performance is apparently not available to a tenant, unless otherwise provided in the lease, is where the tenant seeks specific performance of a landlord’s obligation to repair. In Borochoff Props., Inc. v. Creative Printing Enters., Inc., 210 S.E.2d 809, 810 (Ga. 1974), the Georgia Supreme Court affirmed a lower court’s decision that a tenant could not seek specific performance of the landlord’s repair obligation because the “repair and deduct” remedy (see Section II.C.1 above) was an adequate remedy at law.

E. Implied Covenant of Good Faith and Fair Dealing

1. Historically

Historically, Georgia courts have not recognized implied obligations of reasonableness or good faith in commercial leases. The governing principle has been that “[a]bsent a limiting statute or controlling public policy, [a landlord and tenant] may contract with one another on whatever terms they wish and the written contract defines the full extent of their rights and duties.” Vaswani v. Whohletz, 396 S.E.2d 593, 594 (Ga. Ct. App. 1990). Consequently, the Georgia Court of Appeals has held that a landlord may unreasonably withhold consent to an assignment where the applicable lease language simply required the tenant to obtain landlord’s consent, without specifying whether the landlord could unreasonably withhold consent. Id. Similarly, the court of appeals has affirmed a trial court’s decision that a landlord may unreasonably withhold consent to a tenant’s proposed premises alterations where the applicable lease language required the tenant to obtain the landlord’s consent but did not specify whether the landlord needed to be reasonable or could be unreasonable in granting such consent. Nguyen v. Manley, 363 S.E.2d 613, 614 (Ga. Ct. App. 1987). Indeed, in Nguyen the court declined to recognize an implied duty to be reasonable despite noting “a modern trend [in other jurisdictions] of requiring reasonableness even where no clause expressly requires that consent not be unreasonably withheld.” Id.

2. Recent Case Suggesting Shift In certain cases, Georgia courts have recognized an implied covenant of good

faith and fair dealing in contracts other than commercial leases. See, e.g., Leader


Nat’l Ins. Co. v. Smith, 339 S.E.2d 321, 328 (Ga. Ct. App. 1985). Recently, the court of appeals applied this implied covenant to a commercial lease. Southwestern Composite Technology Corp. v. Americus-Sumter Payroll Dev. Auth., 521 S.E.2d 378, 380 (Ga. Ct. App. 1999). In that case, the tenant defaulted in the payment of rent, and the landlord reentered the premises without terminating the lease. Id. at 379. The lease “obligate[d] the tenant to defray the cost of repairs made by the landlord upon reentering the premises in the event of the tenant’s default without imposing any express requirement that such costs be reasonable.” Id. at 380. After the landlord reentered the premises, the roof was damaged by a storm. Id. at 379. The landlord advised the tenant that it had received a bid for $158,000.00 and a bid for $127,000.00 to repair the roof and proceeded to accept the lower bid. Id. The landlord’s contractor apparently experienced a cost overrun, and the landlord sought to recover $138,975.00 from the tenant for the repair. The court of appeals determined that there was a genuine issue of material fact as to whether the landlord breached the implied covenant of good faith and fair dealing and reversed the trial court’s summary judgment in favor of the landlord. Id. at 380.

It is uncertain whether the Southwestern Composite case is representative of current Georgia law. That court applied the implied covenant of good faith and fair dealing to a commercial lease without addressing the long history of cases in Georgia that do not infer an obligation to be reasonable from commercial leases. Certainly, the cases described in Section II.H.1 above do not technically address the implied covenant of good faith and fair dealing; instead, they address implied reasonableness. However, the court’s emphasis on enforcing the literal words of the lease, without imposing additional duties of reasonableness, in our view, creates doubt as to whether a Georgia court would impose the implied covenant of good faith and fair dealing in a commercial lease context.

F. Tenant’s Ability to Recover Legal Fees

If the lease does not obligate the landlord to pay legal fees, the tenant typically cannot recover them. “The expenses of litigation generally shall not be allowed as part of the damages.” Ga. Code Ann. § 13-6-11 (Supp. 2001). However, in unusual circumstances where the defendant “has acted in bad faith, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense, the jury may allow [recovery of legal fees and expenses].” Ga. Code Ann. § 13-6-11 (Supp. 2001). In addition, a tenant can recover legal fees if the lease provides for the “prevailing party” to recover legal fees, and the tenant is the prevailing party. See Section I.B.3(b)(3) above.

G. Limitations on Tenant’s Contract Remedies

As referenced above, the governing principle for Georgia courts reviewing leases has been that “[a]bsent a limiting statute or controlling public policy, [a landlord


and tenant] may contract with one another on whatever terms they wish and the written contract defines the full extent of their rights and duties.” Vaswani v. Whohletz, 396 S.E.2d 593, 594 (Ga. Ct. App. 1990). “[I]n Georgia there is no generally applicable rule of law forbidding one contracting party from waiving all recourse” for breach of contract by the other party. Imaging Sys. Int’l, Inc. v. Magnetic Resonance Plus, Inc., 490 S.E.2d 124, 127 (Ga. Ct. App. 1997). Applying this general rule, for example, Georgia courts have enforced a provision in a burglar alarm contract in which the burglar alarm company disclaimed responsibility for any losses due to “failure to perform any obligation under” the contract, West Side Loan Office v. Electro-Protective Corp., 306 S.E.2d 686, 687 (Ga. Ct. App. 1983). A lease provision that limits the tenant’s contract remedies would, therefore, appear to be enforceable.

H. Exculpatory Provisions

1. Limiting Tenant’s Tort Remedies

Ga. Code Ann. § 13-8-2(b) provides that, insofar as certain specified contracts relating to the construction, alteration, repair or maintenance of a building structure are concerned, a provision “purporting to indemnify or hold harmless the promisee against liability for damages arising out of bodily injury to persons or damage to property caused by or resulting from the sole negligence of the promisee, his agents or employees, or indemnitee is against public policy and is void and unenforceable.” Ga. Code Ann. § 13-8-2(b) (Supp. 2001). While the statute seems to refer to construction contracts and the like, Georgia courts have repeatedly held that exculpation clauses in commercial leases are among those provisions included within the ambit of Section 13-8-2(b). E.g., Levine v. Peachtree-Twin Towers Co., 289 S.E.2d 306, 309 (Ga. Ct. App. 1982); Barnes v. Pearman, 294 S.E.2d 619, 621 (Ga. Ct. App. 1982), aff’d, 301 S.E.2d 647 (Ga. 1983); Burson v. Copeland, 287 S.E.2d 386, 387-88 (Ga. Ct. App. 1981). Therefore, commercial lease clauses that exculpate landlords from liability to tenants “for the result of landlord’s own negligence, defective construction or failure to repair are void.” Levine v. Peachtree-Twin Towers Co., 289 S.E.2d 306, 309 (Ga. Ct. App. 1982). As the statute, by its terms, invalidates exculpatory clauses as to the “sole” negligence of the party responsible for performing the repair or construction, the Levine case’s reference to the landlord’s “own negligence” suggests that courts may apply this statute more expansively.

2. Limiting Tenant’s Recourse to the Subject Property

In a related matter, the Georgia Court of Appeals recently examined a lease provision that limited the tenant’s ability to execute a judgment against the landlord for breach of the lease. The provision stated that the tenant could not seek to execute any judgment against any asset of the landlord other than the particular property that was the subject of the lease. The court declined to enforce


this provision because the lease was prepared by the landlord and the provision at issue was located within a lengthy “miscellaneous” section. Parkside Center, Ltd. v. Chicagoland Vending, Inc., 552 S.E.2d 557, 611-12 (Ga. Ct. App. 2001). Based upon this case, we recommend that landlord’s move provisions of this type to a separate section of the lease that has a heading that clearly indicates that the provision contains a limitation of the landlord’s liability.

I. Special Rights of Guarantors of Leases

A lease guaranty is governed by general guaranty/suretyship law. See Ga. Code

Ann. § 10-7-1 et seq. Lease guarantors do not have any rights or obligations other than those applicable generally in guaranty/suretyship law. A full review of Georgia guaranty/suretyship law is beyond the scope of this article. Instead, we review selected issues of particular applicability to commercial leases.

1. Identification of Lease Ga. Code Ann. § 10-7-3 provides that “the surety’s liability will not be extended

by implication or interpretation.” Applying this principle, one Georgia court determined that a guarantor was not liable for defaults under a lease because the guaranty was dated February 7, 1986, the lease was dated February 10, 1986, and the guaranty did not otherwise reflect the intent of the parties that the February 7 guaranty apply to the February 10 lease. Avec Corp. v. Schmidt, 427 S.E.2d 850, 851 (Ga. Ct. App. 1993). In light of Avec Corp., therefore, landlords should be careful that a lease guaranty clearly references the applicable lease. We further recommend that the link between the lease and the guaranty be strengthened by specifically referring to the guaranty in the lease and vice versa.

2. Identification of the Obligations Guaranteed Georgia courts have also applied Ga. Code Ann. 10-7-3 strictly when determining

the specific lease obligations that are covered by a guaranty. In Benton v. Lester, 282 S.E.2d 174, 175 (Ga. Ct. App. 1981), the guaranty covered all “rentals.” The court determined that the guaranty did not reach the tenant’s obligations to pay taxes and the cost of certain repairs because the sections of the lease creating those obligations did not state that those obligations were additional “rentals,” and the guaranty did not state that it covered taxes and repair costs. Id. In light of Benton, a landlord should be careful to make sure that the guaranty specifically covers all obligations under the lease, both non-monetary and monetary.

3. Notice of Default Georgia cases do not clearly state whether a guarantor of a lease is entitled to

notice of the tenant’s default. However, Georgia courts have recognized that a guarantor may waive right to notice. See First Nat’l Bank v. Rivercliff Hardware,


Inc., 287 S.E.2d 701, 703 (Ga. Ct. App. 1982). Therefore, we recommend that a landlord’s form guaranty contain a specific waiver of notice of default.

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