A commercial landlord might assume it has recourse to recover unpaid rent from the parent company of a tenant/subsidiary when (1) during the lease term, the tenant is acquired by another company no money in herewhich converts the tenant into its subsidiary, (2) the parent moves into the leased space with its new subsidiary, (3) the parent commingles corporate funds with the subsidiary, (4) the parent and the subsidiary have

A trend to hold managers of residential real estate responsible for dangerous conditions seems to be in the making.  The Worcester Superior Court’s decision earlier this year in Goodman v. First Horizon Loans (WOCV2011-2221) denied SingleSource Property Solutions, LLC’s motion to dismiss claims filed by a tenant at property managed – but not owned – by SingleSource. 

In Massachusetts, the legal process for evicting commercial and residential tenants is governed not by the common law but by a statute (a very old statute – parts of it date from the 1700s), M.G.L. c. 239.  Chapter 239 gives a landlord an expedited judicial procedure, called summary process, to recover possession of its property from a tenant whose tenancy has been terminated – in other words, to evict the tenant.  The statute also allows landlords to recover damages from the tenant for unpaid rent, use and occupancy, and, if the lease permits, rent going forward and fees.

In Cummings Properties, LLC v. Cepoint Networks, LLC (pdf), the Appeals Court was asked if a landlord in a summary process action could sue – in addition to the tenant – a guarantor of the lease.  Cummings Properties leased commercial space to Cepoint Networks.  Bernard Adama executed the lease on behalf of Cepoint, and also signed a personal guaranty of the lease.  Cepoint defaulted on its rent payments, and Cummings brought a summary process action to recover possession and rent from Cepoint.  Cummings also named Mr. Adama as a defendant, seeking to recover the unpaid rent from him under his guaranty.  The District Court entered a default judgment against Cepoint, but dismissed Mr. Adama on the ground that a guarantor is not a proper defendant in a summary process action.  The Appellate Division of the District Court affirmed.

The Appeals Court agreed.  It found the answer as to whether a guarantor could be a defendant in a summary process action in the language of chapter 239, section 1, which provides that “if the lessee . . . holds possession without right . . . , the person entitled to the land or tenements may recover possession thereof under this chapter.”  Thus, the Appeals Court reasoned, summary process under Chapter 239 can only be brought against the party in possession of the premises.  Since a guarantor is not in possession, he is not a proper defendant in a summary process action.  The Appeals Court rejected the landlord’s arguments that guarantors should be defendants because (1) the statute provides for damages, (2) the Massachusetts Rules of Civil Procedure provide for joinder, and (3) judicial economy warrants joinder.  In essence, the Appeals Court’s response was that the statute’s language means what it says, and it’s up to the legislature to change it. 

Continue Reading Appeals Court Rules That Summary Process Can Only Be Used Against Parties In Possession