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Georgia Appeals Court Rules on Subleases

BY PAUL MILLER, ATLANTA, MAY 2021

A Georgia Appeals Court ruling serves as a warning for landlords who accept partial rent or allow a tenant to skip paying rent in a sublease. Without written notice that the landlord intends to enforce the original terms of the lease, a subtenant can argue that the terms were changed and can avoid paying back rent.

 

In The Hatchett Firm, P.C. etal. V. Atlanta Life Financial Group Inc., Atlanta Life Financial Group Inc. subleased office space to two law firms. Following the law firms’ failure to pay rent, Atlanta Life filed suit against them.

 

The Court of Appeals held that by repeatedly accepting less rent than the sublease required or no rent at all, Atlanta Life opened the door to the possibility that a de facto new agreement had been created with its subtenants.

 

Specifically, Atlanta Life did not object to the subtenants’ partial payment or non-payment until 16 months after the subtenants failed to pay the rent in full. This allowed the subtenants to argue that the parties had mutually agreed to suspend the terms of the written sublease and replace it with a new agreement.

 

Even the fact that the sublease had an anti-waiver clause did not help Atlanta Life because its conduct in accepting less rent or no rent sent the message that it was not going to enforce that provision of the sublease. The Court of Appeals held that Atlanta Life would have to prove to a jury at trial that the sublease was not replaced by a new, different agreement created by the parties’ conduct over the 16-month period.