Owner's Actions Can Create Tenant Property Interest

December 15, 2008
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Facts: A tenant decided to turn over ownership of its business to an employee. The employee orally informed the owner that he was taking over the tenant’s business, but did not go through the formality of having the space assigned with a lease agreement. The owner continued to accept rent from the employee.

Three years later, the employee’s space sustained water damage. The employee sued the owner, alleging that its negligence caused the water damage. The trial court ruled in favor of the owner, and the employee appealed. The special appeals court agreed with the trial court, and explained that the employee could not sue the owner because the lease was not properly assigned. The special appeals court concluded, however, that there was a legitimate dispute as to whether the employee gained a property interest by operation of law. The owner appealed.

Decision: A Maryland appeals court upheld the special appeals court’s ruling.

Reasoning: While the lease was not properly assigned, the court determined that a combination of the employee/tenant’s and owner’s actions created a property interest for the employee/tenant.

Source: LaBelle Epoque, LLC v. Old Europe Antique Manor, LLC, October 2008.