Landlord and Tenant Rights and Obligations Evictions

Landlord and Tenant Rights and Obligations

And

Evictions – Working Around Excuses and Traps to

Legally Dispossess a Tenant in Default

Prepared by D. Marsh Prause

And

Presented by George D. Humphrey, III

Allman Spry Davis Leggett & Crumpler, P.A.

380 Knollwood Street, Suite 700

Winston-Salem, NC 27103

mprause@allmanspry.com

ghumphrey@allmanspry.com

Tel: (336) 722-2300

Fax: (336) 722-8720

September, 2015

Landlord and Tenant Rights and Obligations

The respective rights and obligations of a particular landlord and its tenant are

determined by the terms of the lease agreement they enter into, within the construct of

applicable law. Applicable law can include a mix of statutory law enacted by the General

Assembly and case law (also called “common law”) resulting from judicial opinions

rendered over the years, including particularly common law relating to property rights

and contracts. In some situations applicable law may supply a term that the lease is silent

about, “filling a gap” in the lease. In other situations, applicable law may be in direct

conflict with a term of the lease, in which case the offending lease term is likely to be

deemed void and replaced with the term supplied by applicable law.

Although statutes have been enacted specifying some responsibilities of the

parties in connection with residential leases governed by North Carolina law, the

responsibilities of parties to a commercial lease are generally less likely to be established

by statute and are more extensively within the control of the parties to the lease as they

tailor and agree to the terms of the lease. A simple example of this dichotomy is the

landlord’s duty to make repairs to the leased premises: a residential landlord is under a

statutory duty to make certain repairs whereas a commercial landlord has no such duty in

the absence of a lease provision allocating that responsibility to the landlord. Moreover,

an analysis of the rights and obligations of a landlord and tenant in a commercial lease

relationship also differs because commercial premises are not subject to an implied

warranty of habitability and because there is no statutorily-mandated mutuality of

obligations among parties to a commercial lease. The focus of this section is accordingly

on the rights and obligations of parties to residential leases (as opposed to commercial

leases), although some of the principles and provisions covered are applicable to

commercial leases as well.

A full discussion of the manifold substantive and procedural issues that may arise

in a dispute (and the potential litigation of claims) between a landlord and its tenant

exceeds the scope of these written materials. Instead, these materials focus on a

residential tenant’s underlying rights and related landlord responsibilities in connection

with the following circumstances: (1) delivery of the premises at lease inception; (2)

physical defects and maintenance responsibilities; (3) security deposits; (4) disclosure of

lead-based paint risks; (5) premises subject to foreclosure; (6) leases coupled with options

to purchase; (7) notice requirements relating to expiration of the lease’s term; and (8)

disposition of personal property left behind in the premises by a tenant.

A. Landlord’s Obligation to Deliver Premises at Inception of Term

The common law places an implied duty upon a landlord to deliver possession of

the premises to the tenant at the outset of the lease term (or other agreed “delivery date”)

to effectuate the tenant’s leasehold interest in the premises, and most written leases

explicitly require delivery of the premises as well. Disputes over the “delivery date” for

premises subject to a commercial lease are not uncommon, often because the “delivery

date” is tied to the completion of construction work by the landlord. In many commercial

leases, the date on which the tenant must begin to pay rent (the “rent commencement

date”) is linked to the “delivery date,” so the date on which the landlord delivers the

premises to the tenant in a condition consistent with the lease’s requirements affects the

accrual date for the tenant’s obligation to pay rent. With residential leases, however, the

delivery date, rent commencement date, and first date of the term are usually all the same.

Unless a lease term clearly provides to the contrary, the landlord’s implied duty is

not just to deliver possession to the lessee, but to deliver “exclusive” possession of the

premises to the lessee, meaning no other party has a concurrent right to possession of the

same premises. North Carolina adheres to the so-called “English Rule” with respect to

the landlord’s delivery of exclusive possession at the commencement of the lease’s term,

as distinct from the “American Rule” that applies in some other states. Whereas the

“American Rule” requires only that the landlord to deliver a right of exclusive possession

to the new tenant, the “English Rule” requires the landlord to deliver the actuality of

exclusive possession, such that the landlord is in breach of the implied covenant to

deliver exclusive possession if another party remain in possession when the new tenant’s

term commences. See Sloan v. Hart, 150 N.C. 269 (1909).

Timely delivery of the premises to a new tenant can be tricky for a landlord

(either residential or commercial) if the landlord has entered into a lease with the new

tenant while still dealing with a holdover tenant who refuses to leave the same premises.

Even though the holdover tenant may be the party most responsible for interfering with

delivery of the premises to the new tenant, the “English Rule” followed by North

Carolina’s courts places responsibility squarely and solely on the landlord to deliver the

premises to the new tenant in accordance with the new tenant’s lease. See Westport 85

LP v. Casto, 117 N.C. App. 198 (1994); Shelton v. Clinard, 187 N.C. 664 (1924).

Landlords are accordingly advised to avoid entering into a lease with a new tenant that

calls for delivery of the premises as of a specified date unless they are confident that an

existing tenancy for the same premises will terminate first and that the existing tenant

will not hold over (or that they have ample time to resolve any holdover by the existing

tenant, including through legal process if necessary). The landlord’s implied duty to

deliver possession does not, however, require the landlord to intervene if a third party

interferes with a tenant’s right of possession after exclusive possession is given by the

landlord to the tenant at the inception of the lease’s term. See Westport 85 LP v. Casto,

117 N.C. App. 198 (1994).

In addition to the landlord’s implied duty to deliver possession, the covenant of

quiet enjoyment in favor of a tenant that is implied under North Carolina law (and

expressly included in many leases) can be a factor in disputes over possession arising

after possession is delivered by the landlord. The implied covenant of quiet enjoyment

requires the tenant to have quiet and peaceable possession of the leased premises

throughout the term of the lease. See Andrews & Knowles Produce Co. v. Currin, 243

N.C. 131 (1955). However, the covenant of quiet enjoyment only protects the tenant

from acts by the landlord, a party claiming under the landlord, or a party claiming title to

the premises superior to the landlord’s title – it does not protect the tenant generally from

acts of third parties that disrupt the tenant’s possession. See Huggins v. City of

Goldsboro, 154 N.C. 443 (1911).

B. Physical Condition of the Premises and Maintenance Responsibilities

A residential landlord’s duties to its tenant do not end with delivery of the

premises at the start of the lease’s term. Under common law, the residential landlord is

bound by an implied warranty of habitability requiring that the premises be delivered and

maintained in a habitable condition, and certain aspects of the warranty of habitability

that is implied at common law were codified by the North Carolina General Assembly in

1977 when it enacted the Residential Rental Agreements Act (“RRAA”), which is

contained in Article 5 of Chapter 42 of the North Carolina General Statutes. Miller v.

C.W. Myers Trading Post, Inc., 85 N.C. App. 362 (1987). The RRAA by its express

terms “determines the rights, obligations, and remedies under a rental agreement for a

dwelling unit” in North Carolina. Every residential tenancy in North Carolina is

therefore subject to the RRAA. With respect to maintenance obligations, the RRAA

requires a residential landlord to:

1. Comply with applicable building and housing codes;

2. “Make all repairs and do whatever is necessary to put and keep the premises in

a fit and habitable condition”;

3. Keep all common areas in a safe condition;

4. Maintain all “facilities and appliances” (including electrical, plumbing,

sanitary, heating, ventilating, and air conditioning) supplied or required to be

supplied by the landlord in good and safe working order;

5. Provide and maintain operable carbon monoxide detectors (for most premises)

and smoke detectors (including battery replacement at the outset of the

tenancy in the absence of an agreement to the contrary); and

6. Repair or remedy any of twelve “imminently dangerous” conditions within a

reasonable period of time of receiving notice or knowledge of the

condition(s), such conditions being: unsafe wiring; unsafe flooring or steps;

unsafe ceilings or roofs; unsafe chimneys or flues; lack of potable water; lack

of an operable lock on any exterior door; broken windows or ground-level

windows without operable locks; lack of operable heating (within certain

specified system performance parameters); lack of an operable toilet; lack of

an operable bathtub or shower; rat infestation attributable to building flaws;

and mosquito infestation or mold resulting from excessive standing water,

sewage, or flooding problems.

N.C.G.S. § 42-42(a).

Questions often come up about whether and how a tenant needs to affirmatively

notify its landlord of problems with the premises so as to trigger the landlord’s repair

obligations under the RRAA. No notice from the tenant is required for problems existing

at the outset of the lease term (because the landlord is obligated to deliver defect-free

premises at the beginning of the lease), and oral notice of problems needing repair that

arise during the term of the lease is generally adequate, although written notice is

preferable because it is easier to prove. Oral notice alone, however, does not suffice

(necessitating delivery of written notice of the problem to the landlord), to trigger the

landlord’s repair obligations for non-emergency problems with “appliances and facilities”

and with plumbing, sanitary, electrical, and HVAC systems, N.C.G.S. § 42-42(a)(4), and

for problems with smoke and carbon monoxide detectors. N.C.G.S. §§ 42-42(a)(5) & 42-

42(a)(7), unless the problems at issue are serious enough to render the premises unfit or

uninhabitable. See Surratt v. Newton, 99 N.C. App. 396 (1990). It is important to note

that the “appliances and facilities” the landlord is required to maintain include not just the

minimal facilities mandated by the RRAA (e.g., locks on exterior doors and heat), but

any “appliances and facilities” of an optional nature supplied by the landlord with the

premises (e.g., dishwasher, washer/dryer, air conditioning). Mendenhall-Moore Realtors

v. Sedoris, 89 N.C. App. 486 (1988)(hot water not required by RRAA but landlord had

agreed to provide hot water pursuant to the lease).

The RRAA entitles a tenant to decline to take possession of residential premises if

the landlord fails to deliver the premises in the condition called for by the lease.

Mendenhall-Moore Realtors v. Sedoris, 89 N.C. App. 486 (1988). The rights of a tenant

in connection with N.C.G.S. § 42-42 cannot be waived, even if the tenant explicitly or

implicitly accepts premises out of compliance with the statutorily-mandated standards,

including by taking possession of the premises with knowledge of the defects at the

beginning of the term. N.C.G.S. § 42-42(b); Mendenhall-Moore Realtors v. Sedoris, 89

N.C. App. 486 (1988). If a landlord violates the requirements of N.C.G.S. § 42-42(a),

remedies available to the tenant in a civil action include: actual damages in an amount

equal to the difference in fair rental value of the premises free of defects and the fair

rental value of the premises as they are (compromised by the defects), not to exceed the

amount of rent actually paid by the tenant; special and consequential damages; and,

possibly, an order for prospective rent abatement. N.C.G.S. § 42-44(a); Von Pettis

Realty, Inc. v. McKoy, 135 N.C. App. 206 (1999); Cotton v. Stanley, 86 N.C. App. 534

(1987). Moreover, N.C.G.S. §§ 42-44(a1) and -44(a2) prescribe certain penalties that

may be imposed on a landlord or tenant concerning the provision, repair, or replacement

of smoke and carbon monoxide detectors.

Whether or not a residential tenant can withhold rent based on a landlord’s failure

to repair defects in the premises is a recurring issue. Although the tenant’s remedies as

outlined above are broad, and the landlord’s obligation to provide a residential tenant

with “fit” premises and the tenant’s obligations to pay rent and maintain the premises (in

certain specified respects) are “mutually dependent,” N.C.G.S. § 42-41, the RRAA

includes an express prohibition against the unilateral withholding of rent by a tenant

based on issues with the condition of the premises unless the tenant has obtained a

judicial determination that rent should be abated. N.C.G.S. § 42-44(c). Also, it should be

noted that tenants themselves are allocated certain fundamental responsibilities for

maintaining premises they lease under N.C.G.S. § 42-43, and that a tenant’s willful

destruction or damaging of the leased premises constitutes a Class 1 misdemeanor under

N.C.G.S. § 42-11.

Courts have held that in some circumstances a tenant may be in a position to

establish that the landlord’s repair and maintenance practices constitute “unfair and

deceptive trade practices” allowing an award to the tenant of treble damages and

attorneys’ fees pursuant to N.C.G.S. § 75-1.1. Creekside Apartments v. Poteat, 116 N.C.

App. 26 (1994). Under the definition of “landlord” contained in N.C.G.S. § 42-40(3), the

tenant may seek to hold not just the owner(s) of the premises, but also rental agents

(property managers, brokers, etc.), responsible for violations of the RRAA. See Baker v.

Rushing, 104 N.C. App. 240 (1991); Surratt v. Newton, 99 N.C. App. 396 (1990). North

Carolina courts have held that a landlord who negligently fails to make repairs can be

held responsible for damage to a tenant’s personal property. See, e.g., Pierce v. Reichard,

163 N.C. App. 294 (2004)(landlord that declined to address rotten tree limb pointed out

by tenant was liable for damage caused to tenant’s vehicle when limb fell).

In 1979, a retaliatory eviction affirmative defense for residential tenants was

codified by the North Carolina General Assembly. N.C.G.S. § 42-37.1. A tenant is

allowed to defeat a landlord’s claims for possession of the leased premises in a summary

ejectment action if the tenant can present evidence to persuade the court that the action

was brought by the landlord “substantially in response to” the tenant’s good faith

attempt(s) to secure repairs to the premises and/or other rights of the tenant during the

twelve month period preceding the filing of the summary ejectment action. However, the

landlord may nonetheless overcome a retaliatory eviction defense by establishing that the

tenant has failed to pay rent or has held over beyond the expiration of the term of the

lease. A tenant’s rights under the retaliatory eviction statute cannot be waived by the

tenant. N.C.G.S. § 42-37.3.

In addition to considering compliance with the RRAA to avoid liability to a tenant

for not meeting the requirements of the RRAA, residential landlords also need to be

cognizant of the extent to which the RRAA imposes a duty of care and standards that

apply in the context of a lawsuit alleging that negligence by the landlord concerning a

dwelling unit’s physical condition resulted in physical injuries to a tenant or the tenant’s

invitees. N.C.G.S. § 44(d) provides that a violation of the RRAA “shall not constitute

negligence per se,” but North Carolina’s courts have established that the RRAA’s

enactment “left intact established common-law standards of ordinary and reasonable

care” and noncompliance with the RRAA is admissible as evidence of negligence. Lenz

v. Ridgewood Associates, 55 N.C. App. 115 (1981), cert. denied, 305 N.C. 300 (1982).

Moreover, in making repairs required by the RRAA, the residential landlord is under a

duty to exercise due care, such that the landlord can be held liable for injuries caused by

negligently-made repairs. Bolkhir v. N.C. State Univ., 321 N.C. 706 (1988).

Tenants under commercial lease agreements do not enjoy the statutory protections

of the RRAA or the common law protections of the implied warranty of habitability. K

& S Enterprises v. Kennedy Office Supply Co., Inc., 135 N.C. App. 260 (1999).

Moreover, in the absence of lease provisions to the contrary, the common law implies a

duty for the tenant to repair the portions of the premises under the tenant’s control,

although the landlord remains responsible for areas such as common areas outside of the

exclusive control of any one tenant. See Franklin Drug Stores, Inc. v. Gur-Sil Corp., 269

N.C. 169 (1967)(duty to stop drainage into basement); Marina Food Associates, Inc. v.

Marina Restaurant, Inc., 100 N.C. App. 82 (1990)(duty to fix leaking roof). Commercial

(and residential) tenants potentially have recourse for a landlord’s maintenance

deficiencies through the constructive eviction doctrine, if the deficiencies are serious

enough to drive the tenant to abandon the premises.

Constructive eviction occurs “when a landlord breaches a duty under a lease

which renders the premises untenable,” causing the tenant to reasonably abandon the

premises. Marina Food Associates, Inc. v. Marina Restaurant, Inc., 100 N.C. App. 82

(1990)(failure to fix leaky roof). Courts have held that, as a matter of law, a constructive

eviction also constitutes a breach of the implied covenant of quiet enjoyment. Id. A

tenant will be unable to sustain a claim for constructive eviction, however, if it fails to

abandon the premises within a reasonable time from the act of the landlord that the tenant

claims renders the premises untenable. K & S Enterprises v. Kennedy Office Supply Co.,

Inc., 135 N.C. App. 260 (1999)(no constructive eviction when tenant remained in

premises for forty-four months after roof leak began); McNamara v. Wilmington Mall

Realty Corp., 121 N.C. App. 400 (1996)(constructive eviction occurred when retail tenant

abandoned about seven months after landlord failed to act to attenuate excessive noise

from loud music at adjacent aerobics studio). A common example of constructive

eviction in the residential context is a tenant’s abandonment of the premises after the

landlord shuts off the supply of potable water (or other needed utilities) to the premises.

This is also an example of prohibited landlord conduct under North Carolina law, as

residential landlords are not allowed to evict tenants through any approach other than a

summary ejectment action under Chapter 42 of the North Carolina General Statutes.

C. Security Deposits

In 1977, the North Carolina General Assembly enacted the Tenant Deposit

Security Act, codified as Article 6 of Chapter 42 of the North Carolina General Statutes.

This Act mandates that a landlord can only apply a residential tenant’s security deposit

for certain specified items (unpaid rent, damage to the premises, etc.), N.C.G.S. § 42-51,

and must account for such application of the deposit in writing (including itemization of

damage to the premises and resultant repair expenses) and refund any unapplied portion

of the deposit within 30 days of termination of the tenancy and delivery of the premises,

unless an additional period of up to 30 days is required for the landlord to assess the

amount of its claim to the deposit, in which case up to 60 days is allowed as long as the

landlord provides an interim accounting after 30 days. N.C.G.S. § 42-52. The maximum

security deposit a landlord is allowed to take on a residential lease under North Carolina

law is the equivalent of two months’ rent, which is allowed for tenancies of greater than

month-to-month duration. N.C.G.S. § 42-51. (For a month-to-month lease, the security

deposit cannot exceed one and one-half months’ rent. Id.)

D. Disclosure to Tenants of Potential Lead-Based Paint Risks

The Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C.

4852d) and regulations promulgated pursuant to it impose duties on a lessor of residential

premises built before 1978 to disclose certain matters relating to potential lead-based

paint hazards to tenants. These are federal (not state or local) requirements intended to

protect tenants based on the authority of the U.S. Environmental Protection Agency to

regulate certain chemical substances under the Toxic Substances Control Act.

The lessor of a residential dwelling built before 1978 must (before the lease is

executed by the tenant(s)) furnish the tenant(s) with an EPA-approved lead hazard

information pamphlet, 40 C.F.R. § 745.107(1), and disclose the presence of any known

lead-based paint in the premises, 40 C.F.R. § 745.107(2), along with copies of any

records or reports pertaining the lead-based paint hazards in the dwelling. 40 C.F.R. §

745.107(4). The lease agreement itself is also required to include or attach certain

prescribed language about potential lead-based paint risks, 40 C.F.R. § 745.113(b), and

landlords are required to keep certain records relating to such disclosures for at least three

years from the commencement of the lease’s term. 40 C.F.R. § 745.113(c)(1).

Although many landlords are unaware of these lead-based paint rules or chose to

ignore them (and enforcement of them generally has not been a regulatory priority), a

landlord’s failure to follow the rules can subject the landlord to substantial civil penalties

imposed by EPA, with potential liability ranging into the tens of thousands of dollars.

E. Tenants in Foreclosed Properties

Residential foreclosures increased dramatically in the United States beginning in

2008, extending to both owner-occupied and leased residences. In the case of leased

residences, the tenant often suffered hardships when its landlord was subject to a

foreclosure. State and federal authorities responded with legislation intended to protect

tenants residing in leased premises that became subject to a foreclosure proceeding. The

resultant protections for tenants under North Carolina and federal law often present issues

for parties (including lenders) who become landlords by acquiring residential rental

properties in North Carolina through the foreclosure process.

1. Tenant Protections under North Carolina Law

N.C.G.S. § 45-21.17(4) provides that a copy of the notice of sale for a foreclosure

on a residential property containing less than fifteen dwelling units must be mailed to any

person who occupies the property pursuant to a residential lease, addressed to the

premises, and in the name(s) of the tenant(s), if known (and otherwise directed to

“occupant” at the premises address). Any tenant with a leasehold interest in such a

residential property is then allowed to terminate the lease for their dwelling unit in the

property by providing the landlord with a written notice of termination to be effective on

a specified date that is at least ten days after the date of the notice of sale. N.C.G.S. § 45-

45.2. The tenant is then liable to the landlord only for prorated rent going forward to the

specified termination date (and is specifically not liable for any damages relating to early

termination of the tenancy). Id.

A party who purchases leased residential rental properties at a foreclosure sale

takes title subject to the pending leases in the absence of explicit arrangements (e.g., an

assignment agreement with a third party) to the contrary, and is subject under North

Carolina law to requirements to give the tenants specified advance notice before bringing

a post-foreclosure application seeking an order from the clerk for possession of the leased

premises, as the purchaser is entitled to do pursuant to N.C.G.S. § 45-21.29. The

purchaser must give the tenant(s) in the premises ten days advance notice before making

application to the clerk if the property at issue contains less than fifteen dwelling units,

and thirty days advance notice is required for a property containing fifteen or more units.

N.C.G.S. § 45-21.29(k)(5). It should be noted, however, that the requirements of the

federal Protecting Tenants at Foreclosure Act (discussed below) currently require far

more of landlords in this area than what is mandated by the advance notice requirements

of North Carolina law under N.C.G.S. § 45-21.29(k)(5).

2. Tenant Protections Under Federal Law

The Protecting Tenants at Foreclosure Act (“PTFA”) was passed by the United

States Congress and signed into law by President Obama in 2009. PTFA was originally

set to “sunset” at the end of 2012, but Congress acted in 2010 to extend the “sunset” date

to the end of 2014. The PTFA’s protections for tenants leasing residential properties that

are foreclosed on during the tenants’ tenancies are more substantial than the protections

discussed above under North Carolina law, and to the extent the federal provisions are

more stringent than North Carolina law, the federal provisions govern. Although

Congress did not act to further extend the December 31, 2014 expiration of the PTFA, the

requirements of the PTFA likely continue to apply to currently pending foreclosure

actions that were initiated on or before December 31, 2014.

Under PTFA (which is codified at 12 U.S.C. § 5220), a landlord who purchases a

residential rental property through a foreclosure sale is required to allow any bona fide

tenant(s) residing in the property to remain in possession through the end of the term(s)

of their pending lease(s), unless the purchaser will convert the property to use as their

primary residence, in which case the tenant(s) are entitled to 90 days notice before they

can be required to vacate. In the event the tenants are at-will, month-to-month, or do not

have written leases, they are entitled to at least 90 days notice in any event under the

PTFA before they can be required to vacate.

The PTFA applies to foreclosure situations only – it does not apply to short sales

and other workouts. The purchaser can work around PTFA restrictions by paying the

tenant(s) an agreed amount to voluntarily terminate a lease before the lease is set to

expire, a practice known as “cash for keys.” A tenancy is not “bona fide” so as to qualify

for protection under the PTFA if it resulted from a lease of the premises by the mortgagor

(former owner who was foreclosed on) to their child, spouse, or parent, or if it resulted

from a lease that was not the product of an arms length transaction and/or that specifies a

rate of rent substantially below market values. The PTFA does not excuse tenants in

foreclosed properties from compliance with their obligations to pay rent, so the landlord

is free to commence an eviction proceeding for failure to pay rent against a tenant in

default under the lease at any time despite the tenant’s protections under the PTFA.

F. Protections for Tenants in Leases with Purchase Options

In 2010, the North Carolina General Assembly amended the North Carolina

General Statutes to add Chapter 47G, governing option to purchase contracts executed

with lease agreements. The newly added provisions apply to residential lease agreements

that are combined with (or executed concurrently with) an option contract for premises

that will be occupied by the lessee as its principal dwelling. (These are sometimes

referred to as “contract for deed” or “rent to own” arrangements.)

Under the 2010 law, option contracts coupled with residential lease agreements

must be in writing and signed by the parties, must contain certain specified information

(such as the option sales price and any option fees, conditions resulting in the lessee’s

forfeiture of the option, and the time period for exercise of the option), and must be

recorded (directly or via summary memorandum) by the property owner (the lessor)

within five days of full execution. The new law mandates that the lessee be given one

right to cure during any twelve month period before the option can be forfeited, and gives

the lessee rights under specified circumstances to cancel the option contract and recoup

money paid to the lessor (above and beyond the fair rental value of the premises) for the

option. Significantly, the new law provides that a violation of any of its provisions

constitutes an unfair and deceptive trade practice under N.C.G.S. § 75-1.1, exposing the

landlord to potential liability for treble damages and attorneys’ fees. N.C.G.S. § 47G-7.

The relatively new provisions in Chapter 47G are intended to protect tenants who

enter into certain “rent to own” arrangements for a primary residence. Many landlords

and real estate professionals remain unaware of the new provisions and the potential

liability they now face in the event they fail to comply with the provisions, including for

example the requirement that an option executed concurrently with a residential lease be

recorded.

G. Notice Requirements Relating to Expiration of the Lease’s Term

A tenant in possession pursuant to a periodic tenancy (rather than a fixed-term

tenancy) that is not in default of its obligations under the lease is usually entitled to

receive minimum advance notice before the landlord can terminate the lease upon the

expiration of a periodic term. Likewise, the landlord also is entitled to minimum notice

from the tenant in advance of the expiration of the period if the tenant wants to terminate

a periodic lease before it renews for another period. A landlord or tenant desiring to

terminate a residential lease in connection with the impending expiration of a periodic

term accordingly must be cognizant of the advance notice it is required to furnish.

Otherwise, if the landlord or tenant fails to give the required notice in time, the lease will

typically continue for at least one additional period. If the lease specifies procedures for

notice of termination of a periodic tenancy, then those procedures govern. See Stanley v.

Harvey, 90 N.C. App. 535 (1988) (“the parties’ lease may require a notice of termination

that differs both in type and extent from that allowed under Section 42-14”); Cherry v.

Whitehurst, 216 N.C. 340, 343 (1939)(42-14 does not prevent agreement for different

notice arrangements because the provisions of 42-14 are permissive).

On the other hand, if the lease for a periodic tenancy does not address the issue of

advance notice of termination, then the amount of notice required depends on the lease’s

period, as specified by N.C.G.S. § 42-14. The advance notice required by section 42-14

is as follows: for a year-to-year lease, one month or more before the end of the current

year of the tenancy; for a month-to-month lease, seven days or more before the end of the

current month of the tenancy; for a week-to-week lease, two days or more before the end

of the current week of the tenancy. (Note that despite these rules, there is a special rule

under section 42-14 for mobile home lots subject to periodic tendency, requiring notice at

least 60 days before the end of the current rental period, regardless of the length of the

tenancy. Also, 180 days advance notice is required from a landlord who operates a

mobile home community and plans to convert the land used for that purpose to a different

purpose. See N.C.G.S. § 42-14.3.)

If a party’s notice of termination fails to comply with the lease’s advance notice

provisions (or in the absence of such provisions, the rules of N.C.G.S. section 42-14),

then the tenancy will continue for an additional period, with the tenant required to pay

rent at the normal rate for that period and otherwise adhere to the terms and conditions of

the lease. The courts are not likely to be sympathetic to landlords who fail to adhere

rigidly to notice requirements for lease termination. See Stanley v. Harvey, 90 N.C. App.

535 (1988) (when termination of lease depends on notice, notice must be in “strict

compliance” with lease as to “both time and contents”). Notice of termination may be

given in the alternative, however, directing the tenant to, for example, sign a new lease or

vacate at the expiration of the current term. Cla-Mar Management v. Harris, 76 N.C.

App. 300, 304 (1985).

If a lease is for a fixed term of one year or more, and contains no express

provisions to the contrary, North Carolina law calls for a presumption that a year-to-year

tenancy results when the landlord allows the tenant to hold over (by not pursuing

summary ejectment against the tenant and continuing to accept rent). Coulter v. Capitol

Finance Co., 266 N.C. 214 (1966). As a practical matter, this means that a tenant in

possession under a lease for a fixed term of one year will be able to stay on for an

additional year, absent express lease provisions to the contrary, if the landlord acquiesces

in the tenant’s ongoing possession and accepts rent from the tenant for a period beyond

the initial year. If a tenancy at will exists (usually due to a holding over situation), and

the lease does not specify the advance notice required to terminate under those

circumstances, only “reasonable” notice is required. Choate Rental Co. v. Justice, 212

N.C. 523 (1937).

H. Abandoned Personal Property Left Behind by Tenants

A frequent issue for landlords is what to do with a tenant’s equipment and/or

personal property remaining in the premises after the tenant abandons, is dispossessed

(via ejectment) or vacates at the expiration of the lease’s term. There are multiple

statutory provisions relating to these issues, including one from a relatively new law that

applies upon execution of a writ of possession to enforce a judgment for possession

obtained through a summary ejectment proceeding filed on or after September 1, 2013.

The new law amends N.C.G.S. § 42-25.9(g) to reduce from ten days to seven days the

amount of time a landlord needs to wait, after being placed in possession by execution on

a writ, before the landlord can dispose of a tenant’s personal property remaining on the

premises in accordance with N.C.G.S. § 42-36.2, if the landlord desires to handle

disposal. The recent amendment therefore reduces the number of days the landlord must

wait to dispose of the property itself, but it does not eliminate the existing procedural

requirements the landlord must follow under N.C.G.S. § 42-36.2 before disposing of a

tenant’s personal property after executing on a writ of possession. Instead, the 2013

legislation amends N.C.G.S. § 42-36.2 to clarify that after being placed in possession

pursuant to a writ, the landlord must first offer to release the tenant’s personal property

(to the tenant) if the landlord wishes to thereafter dispose of the personal property under

N.C.G.S. § 42-25.9(g) upon the tenant’s failure to retrieve it. Landlords taking advantage

of N.C.G.S. § 42-25.9(g) to handle disposal of a tenant’s property themselves therefore

must remain cognizant of their ongoing need to also comply with N.C.G.S. § 42-36.2.

Under N.C.G.S. § 42-36.2, a landlord retaking possession through execution of a

writ has several options for handling personal property left behind by a tenant because the

tenant is not present or refuses to remove its remaining items when the sheriff’s deputy is

onsite to conduct a lockout. First, the landlord may have the sheriff remove the items and

store them in a nearby storage warehouse at the landlord’s expense. (The sheriff has

discretion to require the landlord to advance the transportation expenses plus the fee for

one month’s storage.) Alternatively, the landlord may request that the sheriff padlock the

premises with the personal property remaining in place. For seven days from the date of

execution, the landlord is allowed (but not required) to move tenant’s items from the

premises into storage, and during that same period is required to release the items to the

tenant (from the premises or the storage warehouse) upon the tenant’s request and during

normal business hours or at a mutually agreed time. After the seven day period expires,

and if the landlord has made an offer to the tenant to release the property but the tenant

has failed to retrieve it, then the landlord is allowed to dispose of the contents, and apply

any sales proceeds against the landlord’s costs of obtaining and executing on the

judgment for possession, in accordance with detailed provisions set forth in N.C.G.S. §

42-25.9(g). An exception to the procedures mandated by N.C.G.S. § 42-36.2 applies

under N.C.G.S. § 42-25.9(h) if the value of the property in the premises at the time of the

sheriff’s execution is $500 or less (increased from $100 or less several years ago), in

which case a five-day period applies for the tenant to retrieve the items.

Items not retrieved by the tenant within the applicable period (five days for items

collectively worth $500 or less and seven days otherwise) become subject to a lien for

costs relating to the ejectment and storage of the items, and the landlord may thereafter

elect to sell the items at a public or private sale upon seven days written notice sent to the

tenant’s last known address, which notice can run concurrently with the seven-day post-

execution waiting period. The landlord is then entitled to apply the sale proceeds against

its losses for unpaid rent, the costs of the sale, storage fees, damage to the premises, with

any remaining proceeds thereafter returned to the tenant if the tenant requests such a

refund within seven days of the date of the sale, and otherwise paid over to the county

government for the county in which the premises at issue are located.

Separate provisions under N.C.G.S. § 42-25.9(d) allow slightly different treatment

if the tenant abandons personal property in the premises in the absence of a summary

ejectment proceeding, or refuses to remove personal property when the sheriff executes

on a writ of possession, and the property left behind is worth $750 or less (increased from

$500 in 2012). Under those circumstances, the landlord may choose to immediately

donate the items to a non-profit that typically sells such used items, provided the non-

profit allows for a thirty-day “holding” period for the tenant to claim the items and the

landlord provides specified notice to the tenant by posting and by mail. (There are

separate provisions on this topic that apply specifically to personal property abandoned

by a tenant in a mobile home.)

In 2012, the General Assembly enacted a new provision, codified at N.C.G.S. §

28A-25-7, pursuant to which the landlord of a deceased residential tenant who is the

“sole occupant” of the dwelling unit at issue is allowed to dispose of the deceased

tenant’s personal property without the need to file a summary ejectment action and

execute on a judgment for possession first, provided the landlord (i) has not been

contacted by any representatives or heirs of the deceased tenant and (ii) adheres to

detailed pre-disposition notification and storage procedures. A simpler procedure

involving donation of the personal property items to a non-profit organization willing to

store them for thirty days applies if the deceased tenant’s property is worth $500 or less.

(A cross-reference to the new procedure under N.C.G.S. § 28A-25-7 was added to

Chapter 42 via a new subsection, N.C.G.S. § 42-36.3.)

For commercial leases, the “landlord’s lien” statute (N.C.G.S. § 44A-2(e))

applies, allowing the landlord to assert a lien in and sell a tenant’s property if the property

remains on the premises at least 21 days after the tenant has vacated (or remains after the

landlord obtains an order for possession of the premises) and the landlord has a “lawful

claim for damages against the tenant.” The amount of the lien is limited to an amount

adequate to cover overdue back rent, damages to the premises, and future rent for up to

60 days from the date that the tenant vacated. Personal property subject to the

“landlord’s lien” is to be sold via a public sale procedure involving detailed advertising

and other requirements, unless it is worth less than $100, in which case it can be donated

to a charitable institution five days after the tenant vacates. The “landlord’s lien” is

subordinate to perfected security interests in the tenant’s property, which often limits its

value to landlords as a practical matter.

Evictions – Working Around Excuses and Traps to Legally

Dispossess a Tenant in Default

It is important for landlords to realize that the eviction process starts well before

an eviction lawsuit is filed in court, and that the landlord-tenant dynamics and

communications preceding the filing of the eviction action can play a major role in

determining whether or not the end result of the process is a good result for the landlord.

This section of the materials accordingly discusses pre-eviction considerations and

aspects of laying the advance ground work for a successful eviction before it covers the

mechanics of the eviction lawsuit itself.

A. Pre-Eviction Assessment, Part I – What Exactly Does the Landlord Want?

Every eviction proceeding begins with a landlord’s assessment that it has a

serious problem with a particular tenant, and landlords ordinarily do not discover the

need to evict a tenant overnight. Usually, the relationship has been troubled for some

time. And usually, there have been prior communications and friction between the tenant

and the landlord. As soon as a landlord believes it might be developing a problem with a

tenant, its first priority needs to be to review the lease and carefully evaluate (possibly

with legal counsel) the full scope of the issues of concern and the tenant’s default, if any.

Not every action by a tenant that troubles a landlord will constitute a default under the

lease, and conversely not every lease default by a tenant may be troubling to the landlord.

Although many evictions are the result of a tenant’s non-payment of rent, a

substantial number of evictions are based on other tenant defaults under both residential

and commercial leases. Whether or not a tenant is in default based on a particular set of

circumstances is usually determined by the terms of the lease, not merely by operation of

law. This is one of many reasons that a written lease is almost always preferable to an

oral lease, although “gray areas” are common even with well-drafted written leases. If a

landlord is in doubt as to whether or not specific circumstances qualify as default under

the terms of the lease, it is usually better for the landlord to err on the side of sending an

appropriate written communication to the tenant about the issues and then evaluating the

tenant’s response. Typically, leases will not contain any provision punishing the landlord

for issuing a misguided notice of default, and a notice of default that is not warranted will

often lead to a productive conversation with the tenant about the situation.

A landlord usually has multiple remedies it can employ in the event of a tenant’s

breach of the lease. Just because a remedy is available, however, does not mean that it is

prudent for the landlord to exercise it, at least initially. The landlord’s approach is often

governed not just by the terms of the lease and the law (determining available remedies)

but by business considerations relating to the tenant, the premises, and the landlord. It is

not unusual for some legally-available remedies to be counterproductive on a practical

business level, and the landlord needs to assess business issues before acting. Common

considerations include: Does the landlord simply want the tenant to pay up on the rent or

to stop certain conduct, or does the landlord just want the tenant out no matter what?

Does the landlord want to ensure that the tenant’s finances remain viable (so it can

continue to pay rent)? Does the landlord want to spend money on legal fees and risk

being countersued? Does the landlord believe the tenant would be “judgment proof” in

the event it sues the tenant and recovers a money judgment? Does the landlord have a

duty to mitigate? What are backfill options? What is the upfit situation? What does the

landlord know about the tenant’s finances? Does the landlord have a broader business

relationship with the tenant that the landlord wants to avoid jeopardizing?

An example of business considerations overriding legal options involves the

common situation of a tenant’s failure to pay rent in full and on time. Many landlords

would not threaten (much less seek) to evict a good, long-term tenant merely because a

single monthly rent payment is not received on time, without having a dialogue with the

tenant about it first and attempting to work with the tenant to address the underlying

issues. Similarly, a good, long-term tenant’s slight underpayment of rent for several

months in a row is something that some landlords would tolerate in some circumstances

in the interest of retaining the tenant. However, even if the landlord elects to not invoke

legal remedies against a tenant in light of business considerations, the landlord should

usually document the circumstances in writing with the tenant to clarify that the

landlord’s accommodation of the tenant does not constitute a waiver of the landlord’s

rights (beyond the extent intended by the landlord).

B. Pre-Eviction Assessment, Part II – What Remedies are Applicable/Available?

After a landlord has carefully assessed the issues of concern to it and the preferred

resolution to the issues, the next step is to consider (again possibly with legal counsel) the

remedies that are potentially available to the landlord under the terms of the lease and

applicable law. Common remedies that might be available to a landlord in the event of

problems with a tenant include: assessment of late fees and/or interest, issuance of notice

to trigger tenant’s right to cure, application of a security deposit being held by the

landlord, termination of the tenant’s leasehold interest and re-entry, assessment of

liquidated damages, termination of the lease, institution of eviction proceedings to seek

possession and a modest amount of money owed, self-help, and filing of a collections

action seeking to recover money owed by the tenant. The terms of the lease often govern

the remedies that are available. Applicable law also controls the availability of many

remedies, however. For instance, as is discussed further below, there are four categories

of tenant conduct on which a landlord can base an eviction action under North Carolina

law, a statutory paradigm that lease terms cannot override.

C. Documentation of Default and Pre-Eviction Notices to Tenant

Depending on the landlord’s objective and expectations, and the requirements of

the lease, the tone, content, and substantive specificity of notice to the tenant can be very

important. A landlord therefore should carefully evaluate its objectives and options

before sending any demand or notice of default, termination, or exercise of remedies to a

tenant. If the landlord’s objective is to regain possession of the premises via eviction, the

landlord must consider which of the authorized bases for an eviction it expects to rely on,

and tailor its notice to the tenant accordingly. If, on the other hand, the tenant has already

vacated and the landlord anticipates a collections action to recover money owed by the

tenant under the lease (but no judgment for possession is needed), other considerations

will apply. And if the landlord does not anticipate either imminent eviction or collections

proceedings, but just wants to nudge the tenant along toward curing a default, then the

form of the communication will be less constrained legally but perhaps more diplomatic.

1. Form and Timing of Pre-Litigation Notices to the Tenant

If a landlord believes a particular situation is likely to result in the filing of an

eviction lawsuit, it important for the landlord to be deliberate about “advance

communications” preceding a potential eviction, not only so as to maximize the

likelihood that the communications will lead to improved lease compliance by the tenant

and stabilization of the landlord’s relationship with the tenant, but also to ensure that if

the landlord ultimately needs to take legal action, it will be poised to prevail and

accomplish its objectives in the courtroom. Communications of default, legal demands,

and notifications of the landlord’s exercise of remedies, such as notice of termination of

the lease, all go hand-in-hand with legal action. Although the landlord sometimes simply

wants to communicate for administrative purposes or to nudge a tenant toward

compliance, on other occasions the landlord’s primary reason for engaging in

communications with the tenant is to lay the groundwork for imminent legal action.

Typically, a landlord should notify a tenant of the landlord’s position on a lease-

related issue (e.g., that the tenant is in default) in writing and as soon as possible once the

circumstances at issue come to the landlord’s attention. The law itself generally does not

require a landlord to supply written notice to the tenant (one notable exception exists for

residential leases for federally-subsidized public housing), but as a practical matter,

reliance on oral notice is usually not prudent. Moreover, most commercial leases and

many residential leases do require written notice. Even if the lease at issue does not

require written notice, written notice constitutes far superior evidence compared to the

landlord’s word against the tenant’s word should litigation ensue and the sufficiency of

notice be challenged.

A common question is whether a landlord needs to take steps to prove that notice

was actually received by the tenant. Depending on the circumstances, proof of receipt is

advisable, but under North Carolina law, it is not required. Instead, proof that notice was

issued (e.g., via mail) by the landlord will generally suffice. See Main Street Shops, Inc.

v. Esquire Collections, Ltd., 115 N.C. App. 510 (1994)(holding that demand was

adequate when landlord mailed notice to the address specified in the lease, but tenant did

not claim the mail, when lease specified written notice of default by mail). Another issue

is where the landlord needs to send the notice. With residential leases, written notice will

typically be directed to the premises. If a commercial lease is involved, however, it is

very important to consult the terms of the lease and send the written notice to the notice

address specified by the lease, which is not always the premises address. Notice may be

required to corporate headquarters, a registered agent, a franchisor, or to the tenant’s

offices at a location other than the premises. Notice also might be required to an obsolete

address that the landlord knows is no longer viable for contact with the tenant, but if that

address remains the notice address specified under the lease because the tenant has not

updated it, the landlord should issue notice to the obsolete address regardless to maintain

compliance with the terms of the lease. Moreover, if the landlord’s objective is to have a

tenant that is in default cure the default, notice to the guarantors (if any) can be helpful as

well, even if not required.

In evaluating how to handle notice to a tenant, a landlord must be aware of any

lease terms that allow the tenant an opportunity to cure upon issuance of notice. Many

commercial and some residential leases allow a tenant to cure its default within the elapse

of a specified time from the landlord’s issuance of notice of the default to the tenant.

Some commercial leases will further provide that the tenant is to be given only a limited

number of opportunities to cure upon notice of default, and if that is the case, then the

importance of written notice of default is magnified because the landlord will have a

difficult time proving that the tenant has exhausted its allocation of cure opportunities

without documentation that can be used to quantify previous occasions on which the

tenant was given an opportunity to cure.

In addition to being cognizant of legal requirements for required elements of

notice to a tenant in certain circumstances, a landlord must also be cautious that its tenant

communications not be misleading, unduly oppressive, or otherwise inappropriate

because North Carolina law allows even “amateur” landlords that rent just a single

residential property to be sued for “unfair and deceptive trade practices” pursuant to

Chapter 75 of the North Carolina General Statutes, Stolflo v. Kernodle, 118 N.C. App.

580 (1995), and it is not uncommon to see a tenant who is sued counterclaim back against

the landlord under Chapter 75 based on the landlord’s business practices (including

communications), which allows a prevailing tenant the potential opportunity to recover

treble damages and attorney fees from the landlord. See, e.g., Stanley v. Moore, 339

N.C. 717 (1995). A landlord should be aware that any written communication with a

tenant could become evidence considered by a judge or jury, and communications that

are disrespectful, profane, or unnecessarily hostile are ill-advised.

2. Notice Required to Initiate an Eviction

Once the landlord has fully assessed the extent of the problem (including whether

the lease has been breached and how), reviewed its options/remedies, evaluated business

considerations, and determined that evicting the tenant is its preferred approach for

addressing the circumstances, strategic written communications consistent with that

preferred approach are critical. Case law has established that North Carolina’s “courts do

not look with favor on lease forfeitures,” Couch v. ADC Realty Corp., 48 N.C. App. 108,

114 (1980), and consequently “[w]hen termination of a lease depends upon notice, the

notice must be given in strict compliance with the contract as to both time and contents.”

Stanley v. Harvey, 90 N.C. App. 535 (1988). It is therefore very important for the

landlord to carefully consult and comply with lease provisions governing notice of

default in order to position itself for a successful summary ejectment action.

a. Demand for rent (under a lease that does not explicitly

authorize termination/re-entry for failure to pay rent)

If the tenant is behind on rent and the landlord expects to pursue summary

ejectment, it is important for the landlord to consult the applicable lease terms (if any)

governing advance notice and opportunity to cure for non-payment of rent. If the lease

does not contain provisions authorizing or governing forfeiture for tenant’s non-payment

of rent, then North Carolina law requires a demand by the landlord to the tenant for all

overdue rent, followed by a 10-day cure period, as a prerequisite to action by the landlord

to dispossess the tenant. N.C.G.S. § 42-3. North Carolina’s courts have ruled that such a

demand for rent must be specific. As one reported decision explains, the demand for rent

under Section 42-3 must include “a clear, unequivocal statement, either oral or written,

requiring the lessee to pay all past due rent.” Snipes v. Snipes, 55 N.C. App. 498, 504

(1982)(landlord’s statement that they “wanted to get all this business settled” was not an

adequate demand).

b. Notice of lease termination (to allow summary

ejectment based on tenant’s holding over or breach of

an explicit lease condition implicating forfeiture)

If the lease does contain explicit provisions concerning forfeiture for tenant’s non-

payment of rent, then those provisions govern, as to provision of advance notice,

opportunity to cure, and other specific issues. If these provisions are such that

termination of the lease for non-payment of rent (or holding over) is at landlord’s option

and therefore not automatic, notice of termination of the lease must be given to the tenant

before the landlord can bring a valid summary ejectment action, as the tenant’s estate

must have “ceased” before the summary ejectment action is brought. See Stanley v.

Harvey, 90 N.C. App. 535 (1988) (notice requesting that tenant “vacate” did not suffice

as notice of termination of lease to enable successful summary ejectment action). Any

communication from a landlord to a tenant intended to facilitate summary ejectment for

the tenant’s holding over or breach of a lease condition should accordingly contain a clear

statement of the landlord’s termination of the lease, as such notice of termination is a

prerequisite to bringing the summary ejectment action. Id.

c. Demand for Surrender of Possession

Moreover, the summary ejectment statute requires that before filing for summary

ejectment based on the tenant’s breach of a lease condition or the tenant’s holding over,

the landlord must make a “demand for surrender” to the tenant. See N.C.G.S. § 42-26.

Consequently, any communication from a landlord to a tenant intended as an imminent

precursor to summary ejectment for the tenant’s holding over or breach of a lease

condition should include a straightforward demand that the tenant surrender the premises.

d. Notice When Landlord Intends to Seek to Recover

Money Owed in Addition to Possession of the Premises

If the landlord plans to use an eviction action to dispossess a tenant and also to

recover money it is owed by a tenant (or if a landlord is bringing an action against a

tenant exclusively for money owed, either because (i) the landlord wants the money but

does not want to dispossess the tenant or (ii) the tenant has unilaterally vacated and

abandoned possession), the landlord also needs to consider the written notice required to

maintain its ability to collect an award of reasonable attorneys’ fees as part of the money

judgment if the lease allows for the recovery of attorneys’ fees. Many commercial leases

and some residential leases allow for the landlord’s recovery of “reasonable attorneys’

fees” in the event of legal action necessitated by a tenant’s default, without specifying

that such fees are to be the actual fees incurred or how the magnitude of such

“reasonable” attorneys’ fees is to be quantified. Section 6-21.2 of the North Carolina

General Statutes provides that in instances involving action to recover a balance owed on

“any note, conditional sale contract, or other evidence of indebtedness,” presumptive

attorney fees of 15% of the “outstanding balance” owed on the contract can be recovered

from the obligee, but only if the obligor notifies the obligee that (i) the contractual

provisions concerning payment of attorneys’ fees in addition to the amount of the

“outstanding balance” will be enforced, and (ii) the obligee is allowed five days from the

obligor’s mailing of such notice to avoid liability for the attorneys’ fees by paying off the

full outstanding balance during that five-day period.

Recent North Carolina case law reaffirms that N.C.G.S. § 6-21.2 does apply to

written leases of real property, allowing a landlord bringing a collections action to

recover presumptive attorneys’ fees of 15% of the money owed by the tenant if the lease

at issue provides for the recovery of “reasonable attorneys’ fees” by the landlord in the

event of legal action resulting from tenant’s default. See WRI/Raleigh, L.P. v. Shaikh,

183 N.C. App. 249, 257-58 (2007)(commercial lease agreement was “evidence of

indebtedness” triggering applicability of § 6-21.2 and allowing plaintiff to collect

attorneys’ fees equal to 15% of the landlord’s damages for unpaid future rent). To

qualify for a presumptive award of attorneys’ fees under Section 6-21.2 equal to 15% of

the money owed by the tenant in connection with a lease that allows for the landlord’s

recovery of “reasonable attorneys’ fees,” the landlord must send a written notice to the

tenant alerting the tenant of their option to avoid the presumptive 15% attorneys’ fees by

paying off the full delinquency within 5 days of the mailing of the notice.

D. Summary Ejectment – the Eviction Proceeding in North Carolina

Laws governing a landlord’s eviction of a tenant vary widely from state to state.

Although the term “eviction” is often used informally in North Carolina, the legal

procedure available to North Carolina landlords to dispossess a tenant is formally known

as “summary ejectment.” The summary ejectment process in North Carolina is

prescribed by statute, and over the years reported decisions from North Carolina’s

appellate courts have clarified a number of the applicable statutory provisions. If the

lease at issue is commercial rather than residential, however, the landlord might have

options to evict a tenant beyond the statutory summary ejectment process, which was

drafted primarily with residential leases in mind but nonetheless also applies to

commercial leases.

Recognizing that a landlord should be able to regain possession of its property in

an expedited fashion in certain circumstances to avoid the premises being held “hostage”

by a tenant unlawfully in possession (“possession is nine-tenths of the law”), the North

Carolina General Assembly codified a procedure for summary ejectment into Article 3 of

Chapter 42 of the North Carolina General Statutes. Although other options are not

precluded for commercial leases, North Carolina law (N.C.G.S. § 42-25.6) provides that

Article 3 of Chapter 42 furnishes the landlord’s exclusive remedy for situations arising

under a residential lease. Despite this, Article 3 does not contain everything that a

landlord needs to know to bring a viable action for summary ejectment, and knowledge

of procedural rules contained in other statutes is vital lest the landlord find itself saddled

with a “not-so-summary ejectment” ordeal that drags out and frustrates the landlord’s

ability to gain control of the premises and rent them to a new tenant.

A fundamental distinction relating to summary ejectment procedure in North

Carolina (and many states) is the difference between the landlord’s remedy to regain

possession of the premises and the landlord’s remedy to recover money damages for the

tenant for rent due under the lease. A summary ejectment action in North Carolina will

always seek possession of the premises. Subject to important limitations, however, the

landlord has the additional option of using the same summary ejectment action to also

seek to recover money that it is owed by the tenant under the lease. Although the Chapter

42 summary ejectment procedure therefore allows the landlord to couple (to an extent) an

action to recover monetary damages with an action for possession, the statutory action is

more oriented towards regaining possession.

Before filing a summary ejectment lawsuit in court, the landlord or its legal

counsel must consider whether certain basic “prerequisites” have been met. These

prerequisites include whether the proper parties are involved, whether the tenant’s alleged

conduct is of a type that warrants for summary ejectment, and whether sufficient advance

notice was given to the tenant before filing.

1. Prerequisite #1 – A Landlord-Tenant Relationship Among the

Parties Warranting Chapter 42 Summary Ejectment

Certain threshold jurisdictional requirements need to be met in order for a party to

bring a Chapter 42 summary ejectment action in the first place. The most fundamental

threshold requirements relate to the role of the parties. Obviously, the plaintiff should be

a “landlord” and the defendant should be a “tenant.” The roles of the participants

sometimes defy simple categorization in practice, however, and the precise identities of

the plaintiff(s) and defendant(s) in summary ejectment proceedings are important because

North Carolina law limits the availability of summary ejectment to relatively narrow

circumstances.

a. A Direct Landlord-Tenant Relationship Must Exist

Between the Parties.

A valid claim for summary ejectment pursuant to Chapter 42 can only be made in

the context of a landlord-tenant relationship. See College Heights Credit Union v. Boyd,

104 N.C. App. 494 (1991); Jones v. Swain, 89 N.C. App. 663 (1988). Although North

Carolina’s jurisprudence has not established a specific definition of “landlord-tenant

relationship,” it is clear that the tenant must enter into “possession under some contract or

lease, either actual or implied with the supposed landlord,” Jones, 89 N.C. App. at 668,

which contract is evidenced by some consideration, typically the payment of rent. Hayes

v. Turner, 98 N.C. App. 451, 454 (1990). In practice, a number of situations arise

requiring consideration of how this fundamental premise applies to the facts at hand. For

example, an action for summary ejectment can be filed by a landlord against an

authorized assignee, because the authorized assignee has a direct relationship with the

landlord (via the assignment agreement, which essentially renders the assignee a tenant of

the landlord). Conversely, a landlord cannot bring a viable summary ejectment action

naming only an unauthorized assignee (essentially a trespasser) as the defendant because

the unauthorized assignee lacks a landlord-tenant relationship with the landlord.

Similarly, a landlord cannot bring a viable summary ejectment action directly against

a sublessee because the sublessee is not a tenant of the landlord. Instead, the landlord

desiring to remove a sublessee from the premises would need to bring a summary ejectment

action naming the landlord’s direct lessee as the defendant, and upon prevailing, the landlord

could dispossess the sublessee, because a judgment for possession against a tenant allows

removal of not just the tenant, but anyone present on the premises via the tenant’s status,

including sublessees, unauthorized assignees, and guests. See Stone v. Guion, 223 N.C. 831

(1944). It is worth noting that although a summary ejectment action will not lie against an

unauthorized assignee/trespasser, N.C.G.S. § 42-4 expressly allows a property owner to bring

an action for recovery of fair rental value against a permissive occupier in the absence of a

valid lease, and such an action could enable the owner to recover compensation for up to

three years of occupancy by the defendant based on the limitations period. See Simon v.

Mock, 75 N.C. App. 564 (1985). An equitable action for unjust enrichment (quantum

meruit) also may be an option for recovering money owed.

The restriction of the summary ejectment process to the landlord-tenant

relationship also precludes invocation of Chapter 42 to resolve situations involving: a

live-in caretaker refusing to leave the premises after the elderly gentleman she was taking

care of died (In re Estate of Hawkins, COA 07-1149 (unpublished), N.C. App. (2008));

heirs occupying a decedent’s property that other heirs claim an exclusive right of

possession for (Hayes v. Turner, 98 N.C. App. 451 (1990)); occupancy based on an

employer-employee relationship (e.g., on-site manager of a self-storage business); a

mortgagee seeking to dispossess a mortgagor (i.e., foreclosure); a purchaser under a real

estate purchase contract seeking to obtain possession from the seller who fails to deliver

the property in accordance with the terms of the contract; or a seller seeking to recover

possession from a defaulting buyer under an installment land sales contract. The

aggrieved party in these situations enjoys legal recourse to obtain possession, but not via

summary ejectment.

b. The Summary Ejectment Action must be Filed in the

Name of the Real Party in Interest.

Summary ejectment actions are not exempt from Rule 17(a) of the North Carolina

Rules of Civil Procedure, which requires that a civil action be prosecuted by a party with

a tangible stake in the outcome such that they will be directly benefited or burdened by a

favorable or adverse judgment. As a practical matter, this rule means the owner of the

property at issue (not the management company retained by the owner) must be named as

the plaintiff in the summary ejectment proceeding. This also means that it is important

for legal counsel to properly identify the correct “special purpose entity” (often a limited

liability company) set up to own the particular shopping center or office park at issue, not

the parent company, as the plaintiff on an ejectment complaint for commercial premises.

Although the owner of the premises must be identified as the plaintiff on the summary

ejectment complaint, a non-attorney agent of the owner with personal knowledge of the

facts is allowed to sign the complaint. See N.C.G.S. § 7A-223. (This is the closest one

can come in North Carolina to legally practicing law without a license.)

2. Prerequisite #2 – Conduct Justifying the Filing of a Summary

Ejectment Action

Under North Carolina’s prescribed statutory procedure, all evictions must be “for

cause” and there are four categorical bases entitling a landlord to summarily eject a

tenant for cause. Although a commercial lease may allow for additional options (see

discussion below), every action by a landlord to evict a residential tenant and any action

relying on the Chapter 42 summary ejectment procedure (as opposed to other remedies)

to evict a commercial tenant must be based on one of the four scenarios that are

addressed separately below:

a. Ejectment for failure to pay rent under a lease lacking

express remedies for nonpayment of rent (N.C.G.S. § 42-3)

Strangely, the most intuitive and commonly cited basis for summary ejectment

actions in North Carolina – general failure by the tenant to pay rent – is not explicitly

covered by Article 3 itself. It is not unusual for attorneys (and non-attorneys) who are

unfamiliar with summary ejectment work in North Carolina to be confused by this – on

its face, the “summary ejectment statute,” Article 3 of Chapter 42, fails to identify non-

payment of rent as a basis for dispossessing a tenant. Instead, a landlord’s prerogative to

evict a tenant for non-payment of rent is contained elsewhere, in N.C.G.S. § 42-3, which

is part of Article 1 of Chapter 42.

Section 42-3 is actually a remedial provision that implies a right of forfeiture for

leases (of questionable draftsmanship) that fail to contain explicit provisions allowing for

lease termination and/or re-entry by the landlord in the event that the tenant fails to pay

rent. See Ryan v. Reynolds, 190 N.C. 563 (1925). Therefore, if a lease contains explicit

provisions governing forfeiture of term should rent not be paid, those provisions will

trump Section 42-3. Stanley v. Harvey, 90 N.C. App. 535 (1988). And Article 3 itself

does contain a provision (N.C.G.S. § 42-26(a)(2)) allowing summary ejectment for

breach of a lease condition that, according to the lease, can be a basis for forfeiture.

Therefore, if a lease specifies that the tenant’s leasehold interest in the premises will be

forfeited 20 days following written notice of default for non-payment of rent unless the

default is cured within those 20 days, then that provision trumps Section 42-3, and a

summary ejectment action can be brought for breach of that lease condition – not based

on N.C.G.S. § 42-3, but instead based on N.C.G.S. § 42-26(a)(2). (This distinction is

significant to the availability to the tenant of the defense of “tender” under N.C.G.S. §

42-33, discussed infra.)

Although this provision implying a right of termination and re-entry for landlords

when a tenant fails to pay rent is contained in Article 1 rather than Article 3, case law

clarifies that Article 1 works in tandem with the summary ejectment process provided for

in Article 3. Charlotte Office Tower Assocs. v. Carolina SNS Corp., 89 N.C. App. 697

(1988). Section 42-3 will only imply a right of forfeiture for non-payment of rent in

leases that require the payment of rent at a definite time, although Section 42-3 applies to

both oral and written leases.

In order to invoke section 42-3 to dispossess a tenant, a landlord is required to

follow certain steps before initiating a summary ejectment action. The landlord (or its

agent) must make an advance demand for rent on the lessee, and the demand must be “for

all past-due rent,” meaning the full amount of the delinquency to date (not just the

amount overdue for the most recent period). After such a demand for rent is made by the

landlord, the landlord must wait 10 calendar days before filing a summary ejectment

proceeding. Note that the demand is to be made on the lessee, which may not be the

same as the current occupant of the premises in the event of a sublease or assignment.

Decisions from North Carolina courts over the years have clarified a number of

issues relating to the 10-day demand for rent required by Section 42-3. The demand for

rent can be either oral or written (the latter is advisable for ease of proof), but must be

affirmative and not vague – “a clear, unequivocal statement, either oral or written,

requiring the lessee to pay all past due rent, is necessary.” Snipes v. Snipes, 55 N.C.

App. 498, 504, aff’d, 306 N.C. 373 (1982)(landlord’s statement to tenant that they

“wanted to get all this business settled” was not an adequate demand). Section 42-3 keys

the 10-day period on the landlord’s making of the demand for rent, not necessarily the

tenant’s receipt of it, and North Carolina case law reinforces that proof that notice was

furnished (e.g., via mail) by the landlord will generally suffice. See, e.g., Main Street

Shops, Inc. v. Esquire Collections, Ltd., 115 N.C. App. 510 (1994)(holding that demand

was adequate when landlord mailed notice to the address specified in the lease, but tenant

did not claim the mail, when lease specified written notice of default by mail).

It is important to note that regardless of the extent to which a lease characterizes

obligations for the tenant to pay for water and sewer service as rent, the summary

ejectment statute does not allow a landlord to evict a tenant for non-payment of costs

owed by the tenant for sub-metered water or sewer service offered by the landlord to the

tenant. See N.C.G.S. § 42-26(b). Moreover, payments received from a tenant must be

applied toward delinquent rent before being applied to delinquent charges for sub-

metered water and/or sewer, unless the tenant specifies to the contrary. Id. Although a

landlord therefore cannot evict a tenant for non-payment (usually non-reimbursement) of

sub-metered water and/or sewer charges, a landlord can sue a tenant in possession for

money owed to collect for such charges.

b. Ejectment for tenant’s breach of a lease condition for

which re-entry is specified (N.C.G.S. § 42-26(a)(2)).

A second basis for summarily ejecting a tenant under North Carolina law is if the

tenant breaches a condition that the lease expressly provides will result in termination of

the tenant’s leasehold estate (forfeiture of the lease term), either automatically, or at the

landlord’s option. The most common example of this sort of condition are lease

provisions providing for termination if the tenant fails to pay rent in a timely fashion,

typically following notice to the tenant and expiration of a cure period. (If this sort of

condition is not written into a lease, then, as discussed above, Section 42-3 will imply it

into the lease.) Other common examples of this sort of condition include conditions

relating to criminal activity on the premises, which are particularly important for

commercial leases because the provisions of Article 7 (discussed below) authorizing

ejectment for criminal activity in the absence of explicit lease provisions apply to

residential leases only. (If a residential lease does contain conditions relating to

ejectment for criminal activity, however, they cannot be in conflict with Article 7.) A

third example, prevalent in commercial leases, is an express right of re-entry for the

landlord in the event of breaches of lease conditions relating to operational default and/or

unauthorized assignment.

One trap landlords must be aware of concerning ejectment for breach of a lease

condition allowing termination at the landlord’s option is that appropriate notice of

termination must be furnished by the landlord to the tenant before the summary ejectment

action is initiated, because the statute specifies that the tenant’s estate must have “ceased”

in order for Section 42-26(a)(2) to be applicable. See Stanley v. Harvey, 90 N.C. App.

535 (1988). If applicable lease provisions establish that termination of the leasehold

estate is automatic upon breach of the specified condition, then the estate will have

“ceased” regardless of notice of termination by the landlord, and notice of termination to

the tenant is not required as a prerequisite to invocation of Section 42-26(2). Id. On the

other hand, if the lease merely gives the landlord the option to reenter if the tenant

engages in the proscribed conduct, then the landlord must notify tenant of its election to

reenter before bringing an action for summary ejectment under Chapter 42.

c. Ejectment for tenant’s holding over following

expiration of the lease’s term (N.C.G.S. § 42-26(a)(1)).

A third basis for summarily ejecting a tenant under North Carolina law lies when

the tenant holds over and continues to occupy the premises after the lease’s term expires.

Before filing a summary ejectment action predicated on this subsection, a landlord must

ensure that the lease has terminated, resulting in a holdover situation. Whether a lease

has terminated often involves notice issues, particularly if the tenancy at issue is a

periodic tenancy rather than a tenancy for years. If the lease terms do not specifically

address notice of termination, then North Carolina law (N.C.G.S. § 42-14) will supply

presumptive advance notice requirements for termination. Moreover, a landlord who

accepts rent from a tenant who holds over needs to be aware of lease provisions

governing the consequences of that, and also of what will be implied by law should rent

be accepted in the absence of explicit lease provisions addressing the consequences.

To prevail in a summary ejectment proceeding based on the tenant holding over,

the landlord must prove that it gave adequate advance notice to the tenant that the lease

would terminate at the end of the applicable term, and that the tenant did not vacate the

premises at the end of the term. In holdover cases, money damages for the holdover

period are determined by the “fair rental value” for the premises. Seligson v. Klyman,

227 N.C. 347, 349 (1947). The “fair rental value” will often be the lease rate (including

any specified “holdover rate,” often 150% of the base rent at the end of the lease’s term),

but the lease rate is not necessarily dispositive on the issue. For obvious reasons, a tenant

who is holding over may not avoid landlord’s procurement of an order for possession by

tendering rent pursuant to N.C.G.S. § 42-33. Sometimes a lease (usually a commercial

lease) will allow a landlord the right to unilaterally terminate the lease without cause,

usually upon the provision of certain minimum advance written notice. If the landlord

delivers such notice and the tenant remains in possession, the landlord can evict the

tenant for holding over beyond the expiration of the lease’s term.

d. Ejectment for certain criminal activity on premises that

are subject to a residential lease (N.C.G.S. § 42-63).

In 1995, the North Carolina General Assembly amended Chapter 42 to add

Article 7, entitled “Expedited Eviction of Drug Traffickers and other Criminals,” creating

a fourth basis for summary ejectment that is applicable to residential leases only. The

provisions of Article 7 are quite detailed and deviate in many respects from the

procedures for pursuing eviction of a tenant on one of the other three bases, but in

summary, the major features of actions under Article 7 are as follows: (1) the action need

not be against a lessee – instead, it can be brought against a lessee’s family member or

guest who is involved in criminal activity; (2) the action can be a “complete” eviction

targeting the lessee and anyone claiming a right of possession via the lessee, or a “partial”

eviction targeting persons other than the lessee; (3) the action can be brought initially in

magistrate’s court or in district court (allowing for the availability of injunctive relief);

(4) the action need not be limited to a specific unit within multi-family premises – it

could specify a common area, for example; (5) not all criminal activity will trigger

Article 7, although drug related activity beyond simple possession (see N.C.G.S. § 90-95)

qualifies, as does any activity that broadly threatens the health and/or safety of other

tenants; (6) the action can be triggered if a person other than the tenant is “banned” from

the premises to the tenant’s knowledge, but the tenant allows the “banned” person to

return or fails to immediately contact the landlord or law enforcement upon the “banned”

person’s return to the premises; (7) if Section 8 housing or public housing is involved,

tenant fault must be proven; and (8) conditional ejectment orders are allowed.

e. Specialized Issues Relating to Agricultural Tenancies,

Vacation Rentals, and Mobile Homes.

In addition to the four avenues for summary ejectment discussed above, there are

additional provisions applicable under North Carolina law to very specific circumstances

involving agricultural tenancies, vacation rentals, and mobile (“manufactured”) homes.

There are detailed provisions in Article 2 of Chapter 42 that apply exclusively to

agricultural tenancies, and in 1999, the North Carolina General Assembly enacted the

“North Carolina Vacation Rental Act” (codified as Chapter 42A), which applies

exclusively to the “rental of residential property for vacation, leisure, or recreation

purposes for fewer than 90 days by a person who has a place of permanent residence to

which he or she intends to return.” Special provisions concerning mobile homes are

scattered throughout the North Carolina General Statutes, in many different locations. In

general, the specialized issues relating to situations involving agricultural tenancies,

vacation home rentals, and the rental of mobile homes and/or mobile home lots are

beyond the scope of this manuscript, although some of the most significant provisions

relating to vacation homes and mobile homes lots are noted.

3. Prerequisite #3 – Adequate Advance Notice to the Tenant Before the

Landlord Files the Summary Ejectment Action

The question asked probably more than any other by landlords who are not

familiar with summary ejectment in North Carolina is “how quickly can I evict this

tenant.” Because most leases and Chapter 42 contain provisions requiring advance notice

to the tenant before a summary ejectment action is filed, the answer to that question

depends as much on the terms of the lease as it does on the summary ejectment

procedure.

Most leases typically require that the tenant be afforded a certain amount of

advance notice (and opportunity to cure any default) before a summary ejectment

proceeding can be brought. If the lease does not contain such provisions, Section 42-3 of

the North Carolina General Statutes requires that the landlord wait for ten days after

making a demand for rent on the tenant (assuming non-payment of rent is the basis for

default/summary ejectment). Only after the advance notice and opportunity to cure

required by the lease (or presumed by the law under Section 42-3) has been fully afforded

to the tenant, is the landlord is free to file a complaint initiating an action for summary

ejectment in North Carolina. (From that point (the filing of the action) forward, the

celerity with which the process moves forward is largely mandated by Chapter 42 and

certain procedural statutes, and, absent an appeal, the landlord will typically need to wait

another three weeks to recover possession.)

4. Prerequisite #4 – If the Landlord is Seeking Money Owed as Part of

the Ejectment Action, the Amount Sought Must not Exceed $10,000.

If the landlord wishes to recover money owed from the tenant in the same legal

action used by the landlord to recover possession of the premises (the summary ejectment

action), then the landlord needs to make sure that the money owed is less than

$10,000.00, because that is the limit on the amount of money damages that can be

awarded in an action brought under Chapter 42, although the limit is established by

procedural rules applicable to small claims actions, not by Chapter 42 itself. This

$10,000 limit requires a landlord to bifurcate its action for money damages from its

action for possession if the money damages sought exceed $10,000 (which is often the

case for a commercial lease).

Under those circumstances, a landlord will file a Chapter 42 summary ejectment

action seeking only possession and court costs, and then bring a second, separate action

for money damages against the tenant in either district court (if the damages run from

$10,001 to $25,000) or superior court (if the damages exceed $25,000). (Per N.C.G.S. §

7A-243, as amended in 2013 by Session Law 2013-159, actions seeking between $10,001

and $25,000 in damages and filed from August 1, 2013 through June 30, 2015 can be

filed at the plaintiff’s election in either district court or superior court.) A separate action

is clearly authorized by Chapter 42 for money owed by the tenant to the landlord if

possession only (plus court costs) is sought in the summary ejectment action. See

N.C.G.S. § 42-28 (If landlord “omits to make such a claim [for money damages], he shall

not be prejudiced thereby in any other action for their recovery.”) However, if any

money damages are sought in the summary ejectment action, the plaintiff is precluded

from seeking additional money damages from the tenant in a separate (bifurcated) action,

because res judicata principles require that all money damages must be recovered in a

single action. See Chrisalis Properties, Inc. v. Separate Quarters, Inc., 101 N.C. App. 81

(1990), disc. review denied, 328 N.C. 570 (1991)(not possible for landlord to split its

money damages into two causes of action such that some of the money damages are

sought in one action and the remainder are sought in a different action).

Issues relating to major bifurcated collections actions brought against tenants

(either in or out of possession) in district or superior court to recover money owed are

beyond the scope of this manuscript. Such actions are typically based on breach of

contract (the lease), and seek compensatory damages including unpaid back rent, future

rent, liquidated damages, and/or reasonable attorneys’ fees. The important point for

purposes of this program is that a landlord needs to avoid the potentially expensive

mistakes of either seeking money owed in excess of $10,000 when filing a Chapter 42

summary ejectment action against a tenant, or seeking to recover some but not all of its

money damages in the Chapter 42 summary ejectment action.

E. Summary Ejectment Procedure

Summary ejectment procedure can be broken up into major steps, including:

filing and service of a summons and complaint in the appropriate county; trial to

judgment before a magistrate judge; possible appeal to district court for trial de novo; and

execution on the judgment (assuming the landlord prevails at trial and there is no appeal).

1. Complaint and Summons – Where and How to Initiate the Action

After giving the tenant adequate notice and opportunity to cure, the landlord is

free to initiate a summary ejectment action by preparing and filing a complaint. This

raises the procedural issues of where and how to file the complaint – issues that are not

fully addressed by Chapter 42 itself. An action for summary ejectment is brought in the

county where the leased premises (or a portion of them) are located pursuant to the venue

provisions of N.C.G.S. § 1-76, which provides that an action for “[r]ecovery of real

property, or of an estate or interest therein, or for a determination in any form of such

right or interest” is to be brought in the county where the property (or a portion of it) is

located. See McCrary Stone Services, Inc. v. Lyalls, 77 N.C. App. 796 (1985), disc.

review denied, 315 N.C. 588 (1986); Snow v. Yates, 99 N.C. App. 317 (1990).

Every action for summary ejectment in North Carolina starts in Magistrate’s

Court (commonly referred to as “small claims court”) regardless of whether it involves a

$300/month residential lease or a $30,000/month commercial lease. Actions pending in

Magistrate’s Court are assigned docket numbers containing the letters “CvM” (as

opposed to “CvD” for district court or “CvS” for superior court). Magistrate’s Court is a

subunit of district court in North Carolina, and procedure in Magistrate’s Court is

governed by some specific rules as well as the general rules for district court. See

N.C.G.S. § 7A-223. The maximum amount in controversy for Magistrates Court is now

$10,000.00, up from $5,000.00 for actions filed on or after August 1, 2013 (per N.C.G.S.

§ 7A-210(1), as amended by Session Law 2013-159), which is why a landlord needs to

“bifurcate” its causes of action and bring a separate action to recover money owed by the

tenant if the landlord wants to recover more than $10,000 in monetary damages. (Per

N.C.G.S. § 7A-243(1), costs and interest are not considered in determining if the amount

sought exceeds $10,000.) The filing fee imposed by the State of North Carolina for filing

a complaint (including for summary ejectment) in Magistrate’s Court is currently $96,

and the service fee for serving the summons and complaint on each defendant is $30 (per

defendant). A landlord therefore will incur a total of $126 in court costs just to file a

summary ejectment action against a single lessee.

In preparing a complaint to initiate a summary ejectment proceeding, the landlord

must be careful to plead all of the essential elements of the summary ejectment cause of

action: (i) a valid landlord-tenant relationship between plaintiff and defendant for

premises located in the county where the complaint is to be filed; (ii) the tenant remains

in possession; (iii) after tenant engaged in conduct allowing ejectment (failing to pay

overdue rent within ten days of notice, holding over after lease expiration, engaging in

conduct for which the lease allows reentry, or complicity in specified criminal conduct);

and (iv) after landlord has demanded surrender and not given tenant permission to

remain. The North Carolina Administrative Office of the Courts has prepared a form

complaint for summary ejectment (Form AOC-CVM-201). This form is very helpful in

terms of ensuring that a plaintiff pleads and proves all of the required elements of a claim

for summary ejectment. Moreover, the magistrate judges are generally familiar with this

standardized form and appreciate its use, so use of the form is strongly recommended.

After the landlord files the complaint, the Clerk of Superior Court is required by

N.C.G.S. § 42-28 to issue summons(es) notifying the defendant(s) to appear for a trial of

the matter before a magistrate judge within seven business days. Initial service of the

summons for a summary ejectment action is by first class mail per N.C.G.S. § 42-29, and

must issue from sheriff’s deputies to defendant(s) “no later than the end of the next

business day or as soon as practicable” to each defendant’s last known address in a

stamped, addressed envelope to be provided by the plaintiff. Then, within five days of

issuance of the summons, sheriff’s deputies are directed to attempt contact to each

defendant by telephone or by visiting the defendant’s abode, to arrange for personal

service. See N.C.G.S. § 42-29.

If personal service on the tenant/defendant cannot be made, then the deputies are

to affix the summons and complaint to the premises (called “posting” the premises). Id.

This form of service by “posting” is unique to summary ejectment actions and is

authorized by N.C.G.S. § 7A-217(4). If personal service is not obtained and service is

effected by mail and/or “posting” the premises only, then the plaintiff can get an order for

possession and court costs, but not an award of money damages (unless defendant(s) are

present at the hearing). Although no case law from the North Carolina courts has

confirmed this, it is widely accepted and has been addressed in a 1992 opinion issued by

the North Carolina Attorney General’s Office. A landlord’s decision on bifurcation

(whether to seek money damages in a separate lawsuit) therefore has consequences for

service of process. If a landlord elects to bifurcate and limit its action in Magistrate’s

Court to seeking possession and court costs, then the action is deemed in rem and

adequate service in that action can be obtained via mail and/or posting of the premises

only. However, if a landlord refrains from bifurcating and instead seeks to recover

money damages of up to $10,000 (in addition to possession and court costs) in

Magistrate’s Court, then the action is to an extent in personam and personal service on

the defendant(s) is necessary (first class mail to defendants and posting the premises

alone will not suffice).

There is no formal procedure for the tenant to file an “answer” or motion before a

summary ejectment trial in Magistrate’s Court, and there are no provisions allowing for

the conduct of discovery before trial. Although the presiding magistrate judge has

limited discretion to allow a continuance of the trial, continuances are generally

disfavored in summary ejectment proceedings, and in any event, the trial cannot be

continued such that it is set more than 30 days from the date on which the action was

filed, absent the consent of all parties. See N.C.G.S. § 7A-214. The rules on

continuances were further tightened up in 2013 by the North Carolina General Assembly

through its amendment of N.C.G.S. § 7A-223(b) to provide that for actions filed on or

after September 1, 2013, “the magistrate shall not continue a matter for more than five

days or until the next session of small claims court, whichever is longer, without the

consent of the parties.” See N.C.G.S. § 7A-223(b) (as amended by Session Law 2013-

334). In evaluating a motion for a continuance, the magistrate judge also is required to

adhere to Rule 40(b) of the North Carolina Rules of Civil Procedure, which mandates that

“[a] continuance may be granted only for good cause shown and upon such terms and

conditions as justice may require."

2. The Summary Ejectment Trial

Based on the procedures above, a bench trial is typically conducted within ten

days of the filing of a Chapter 42 summary ejectment action, without any advance

discovery, a response to the complaint by the tenant/defendant, or any motions,

dispositive, in limine, or otherwise. This is what helps to keep summary ejectment

“summary” and is why the process is of benefit to landlords. The magistrate judge

presiding over the ensuing bench trial has a great deal of discretion, and it is important to

understand the magistrate judge’s perspective. It is unusual for a magistrate judge to

have a law degree in North Carolina, and many of the magistrate judges are former

sheriff’s deputies. The practices and legal knowledge of magistrate judges can vary

greatly from one county to another. Compared to district court judges and superior court

judges, magistrate judges have little to no support staff, so it can be difficult to

communicate with them outside of hearings for ministerial purposes (e.g., to tender

paperwork requesting a voluntary dismissal without prejudice in advance of trial). The

magistrate judge presiding over a summary ejectment trial conducts the trial, makes a

determination (and usually announces it in open court) and then, if the landlord carries its

burden of proof, issues a “Judgment for Possession” that will typically consist of the form

judgment created by the North Carolina Administrative Office of the Courts (Form AOC-

CVM-401), filled in and signed by the magistrate judge.

a. The Landlord’s Case-in-Chief and Burden of Proof.

A landlord seeking summary ejectment is required to prove its case by a

preponderance of the evidence in order to obtain a judgment for possession of the

premises. See N.C.G.S. § 42-30; Durham Hosiery Mill L.P. v. Morris, 720 S.E.2d 426,

429-30 (N.C. App. 2011). This means that the plaintiff landlord must persuade the

presiding magistrate judge that it is more likely than not that the landlord meets each of

the elements of the summary ejectment cause of action, as defined by Chapter 42: (i) that

a valid landlord-tenant relationship between plaintiff and defendant for premises located

in the county where the complaint is to be filed, which is usually established through

presentation of a written lease; (ii) that the tenant remains in possession; (iii) after the

tenant engaged in conduct allowing ejectment (failing to pay overdue rent within ten days

of notice, holding over after lease expiration, engaging in conduct for which the lease

allows reentry, or complicity in specified criminal conduct); and (iv) landlord has

demanded surrender and not given tenant permission to remain. As a practical matter,

most magistrate judges will also need to be satisfied that process was served on the tenant

in accordance with the statutory requirements, or that tenant has actual notice of the trial

(which can be established by tenant’s presence or representation at the trial).

At the summary ejectment trial, the landlord may present its evidence itself (pro

se), through counsel, or through a non-attorney agent with personal knowledge of the

facts. If a non-attorney agent is used to present the evidence, it is critical that the non-

attorney agent have personal (direct) knowledge of the facts; otherwise, some magistrate

judges will take the position that the agent cannot present the case and also cannot testify

as a witness, leaving the landlord in a vulnerable position (likely facing dismissal of the

case). The person presenting the landlord’s evidence can rely on documentary evidence

(usually the lease, if written, is presented, along with a ledger for the tenant’s account),

their own testimony, and/or witness testimony, either live or via affidavit. If the tenant is

present, they can be called as a witness and cross-examined. After the landlord’s

case/evidence is presented, the tenant is given a similar opportunity to present its

evidence. If the tenant defendant does not attend the trial before the magistrate judge,

N.C.G.S. § 42-30 mandates that the landlord is entitled to receive judgment on the

pleadings in its favor for possession. The rules of evidence are not rigorously applied in

magistrate’s court, and the presiding magistrate judge has great discretion concerning the

admissibility, authenticity, and weight of the evidence.

A plaintiff seeking possession only need not call witnesses to carry its burden of

proof in a summary ejectment proceeding, and if the tenant is not present or represented

by counsel at the hearing, the plaintiff need not present any evidence at all beyond a

properly served complaint to obtain a judgment for possession. N.C.G.S. § 42-30.

However, if the landlord wishes to receive a receive a judgment for recovery of damages

for money owed by the tenant, the landlord will need to present at least some evidence

establishing its entitlement to the money damages it seeks, including testimony, either

live or via affidavit. Id.

b. Tenant’s Defenses and Tender of Rent.

Generally, there are no formal affirmative defenses available to a tenant in a

Chapter 42 summary ejectment proceeding, at least to the extent the action seeks

possession of the premises (as opposed to money damages). Instead, the tenant must

present evidence to refute the landlord’s evidence such that the landlord does not

establish the elements of the cause of action by a preponderance of the evidence. (An

example is waiver/estoppel defenses (e.g., via landlord’s ongoing acceptance of rent),

which negate the landlord’s evidence that it is has not given the tenant permission to

remain.) There is, however, one significant exception: the defense of tender. In a

summary judgment action predicated on Section 42-3 (for non-payment of rent), the

action must be dismissed under N.C.G.S. § 42-33 if the tenant tenders the full disputed

rent to the landlord in cash at any time prior to judgment, including during the trial before

the magistrate judge. However, that opportunity to tender (with the landlord having no

choice but to accept) does not apply in a summary ejectment action predicated on one of

the bases other than non-payment of rent per Section 42-3. Seligson v. Klyman, 227 N.C.

347 (1947).

A landlord also should be cognizant that its acceptance of rent from a tenant after

the tenant has breached the lease can sometimes be construed as a waiver by the landlord

of the breach, depending on the nature of the parties’ communications and the terms of

the lease addressing acceptance and application of partial payments. See, e.g., Office

Enterprises, Inc. v. Pappas, 19 N.C. App. 725, 728 (1973)(landlord that accepted and held

check from tenant could not allege breach of the lease for nonpayment even though

landlord did not cash check); Automotive Group, LLC v. A-1 Auto Charlotte, LLC, COA

13-608 (unpublished), N.C. App. 2013)(landlord did not waive tenant’s lease breaches

when it returned all checks tendered by tenant); Gayatri MAA, Inc. v. Terrible T. LLC,

COA 09-1614 (unpublished), N.C. App. (2010))(lessor waived its right to reenter based

on tenant’s inadvertently insufficient monthly rent checks when lessor accepted

underpayments from tenant and held them for five months without protest, thereby

inducing lessee to believe that lessor would waive the requirement of payment in full as

to those checks). Notably, a 2012 amendment to N.C.G.S. § 42-26 added a new

subsection, N.C.G.S. § 42-26(c), which suggests that a landlord’s acceptance of a partial

rent payment during a pending ejectment action based on breach of a lease condition does

not waive the breach upon which the action is based provided the lease contains a clause

to that effect, and that the landlord’s reliance on such a lease provision to accept a partial

payment does not constitute an unfair and deceptive trade practice under Chapter 75 of

the General Statutes.

c. Money Damages Available to the Landlord.

As noted above, a landlord bringing an action for summary ejectment under

Chapter 42 can seek to recover money damages of up to $10,000 in the same action. The

money damages the landlord is allowed to seek include a variety of damages ranging

from unpaid “back” rent (including late fees, which for residential leases are limited by

N.C.G.S. § 42-46 to the greater of $15 or 5% of the amount of the late payment), fair

rental value for any holdover occupancy by tenant, and damages to compensate the

landlord for physical damage caused by the tenant to the premises. A money judgment

awarded against the tenant can include rent due through the date of judgment (the likely

limit for residential leases), as well as “future rent” through the lease’s prescribed

termination date if the lease allows such damages to be sought by the landlord (which is

likely for commercial leases). See Holly Farm Foods, Inc. v. Kuykendall, 114 N.C. App.

412 (1994). Any “future rent” sought by the landlord from the old tenant will be subject

to an offset for rent to be received from a new tenant via backfill of the premises

(mitigation of damages), minus any expenses incurred in connection with backfilling the

premises (e.g., broker’s commission).

Under North Carolina law, the landlord is generally under a duty to mitigate its

damages by making the premises available for lease to a new tenant. Monger v.

Lutterloh, 195 N.C. 274 (1928); Isbey v. Crews, 284 S.E.2d 334 (1981). However, an

award of future rent is only subject to evidence of offset for mitigation based on evidence

of mitigation that is available at the time the award is made (at the time of the summary

ejectment if the action for damages is not bifurcated). See Chrisalis Properties, Inc. v.

Separate Quarters, Inc., 101 N.C. App. 81 (1990), disc. review denied, 328 N.C. 570

(1991). Parties to a commercial lease governed by North Carolina are allowed to

effectively disclaim the landlord’s duty to mitigate its damages. See Sylva Shops L.P. v.

Hibbard, 175 N.C. App. 423 (2006); Kotis Properties, Inc. v. Casey’s, Inc., 183 N.C.

App. 617 (2007).

3. Judgment at Conclusion of the Summary Ejectment Trial

In 2013, the North Carolina General Assembly amended the procedural rules

governing summary ejectment actions to provide that for any summary ejectment action

filed on or after September 1, 2013, the presiding magistrate judge must render judgment

on the same day that the presentation of evidence and legal authorities is complete, unless

the parties agree to a longer period or the action is based on criminal activity, a breach

other than non-payment of rent, or a Section 8 lease, in which case the judgment must be

rendered within five business days. See N.C.G.S. § 7A-222(b) (as amended by Session

Law 2013-334). Assuming the landlord prevails at trial before the magistrate judge and

obtains a judgment for possession, the landlord must wait for a ten-day appeal period

from entry of the judgment to expire (see N.C.G.S. § 7A-228) before the landlord can

request the issuance of a writ of possession, allowing the sheriff’s department for the

county where the premises are located to perform a lockout, effectively dispossessing the

tenant from the premises. See N.C.G.S. § 42-36.2.

4. Tenant’s Right of Appeal of a Judgment for Possession

A tenant facing an adverse judgment for possession is able to appeal the

magistrate judge’s judgment within ten days of the judgment’s entry, in which case the

result is an expedited de novo retrial before a district court judge. See N.C.G.S. § 42-34.

As a practical matter, such appeals are rare because the tenant is required to post a bond

equal to the amount of rent in arrears to stay execution of the magistrate’s judgment

during appeal, and is also required to pay rent to the clerk of court as it becomes due

while the appeal is pending. Id. (The requirement for the tenant to post bond in the

amount of the full delinquency in order to appeal is the reason why the summary

ejectment form complaint has a space on it for the amount of rent past due, in addition to

a space for the monthly rate of rent, that should be filled in even if the landlord is not

seeking a money judgment.) If there is a dispute over the amount of the total

delinquency, the magistrate judge has to discretion to reduce the amount of the bond the

tenant must post to appeal. In 2013, the North Carolina General Assembly amended

N.C.G.S. § 7A-228(b) to provide that for summary ejectment actions filed on or after

September 1, 2013, an appeal to district court is to be dismissed if the appellant fails to

pay the costs of court to appeal within ten days after entry of the magistrate’s judgment,

decreasing the period to pay from twenty days to ten. See N.C.G.S. § 7A-228(b) (as

amended by Session Law 2013-334). Under the same new 2013 law, the landlord is

entitled to move to dismiss the tenant’s appeal to district court if the tenant did not raise

any defense orally or in writing during the initial proceeding before the magistrate judge;

does not file a motion, answer, or counterclaim in the district court; and fails to make any

payment due in connection with the appeal undertaking (bond) requirements to stay

execution on the judgment for possession. See N.C.G.S. § 7A-228(d) (as amended by

Session Law 2013-334). This new provision is intended to give landlords the ability to

dismiss an appeal that is likely taken by the tenant primarily for purposes of delay.

In the event of an appeal to district court, discovery is authorized should the

parties wish to conduct it. See N.C.G.S. § 42-34. At the district court level, motions

practice is also likely, and the appealing tenant faces the prospect of needing to defend a

motion for summary judgment. This can extend the timeframe for a trial at the district

court level to 3-4 months, and the landlord can apply to the clerk during the pendency of

the appeal for the clerk to pay out to the landlord any amount of the rental payments the

clerk is holding that the defendant paid into the clerk and that are not claimed by the

defendant in its pleadings. N.C.G.S. §42-34(e). If the tenant fails to make any ongoing

payment of rent during the pendency of the appeal within five days of the date it becomes

due, however, the clerk will issue execution on the magistrate judge’s judgment upon

application by the landlord. N.C.G.S. § 42-34(f).

It is important to note that a monetary counterclaim that a tenant is unable to

assert against the landlord in Magistrate’s Court because it is for an amount greater than

$10,000 and therefore exceeds the jurisdictional maximum for Magistrate’s Court might

need to be asserted upon a de novo appeal at the district court level if it is deemed a

compulsory counterclaim pursuant to Rule 13(a) of the North Carolina Rules of Civil

Procedure and it does not exceed the jurisdictional maximum for district court ($25,000

for actions filed on or after June 1, 2013). See Holloway v. Holloway, 726 S.E.2d 198,

202 (N.C. App. 2012).

5. Enforcing Judgments Obtained Against a Tenant

Assuming the landlord prevails at trial before the magistrate judge and obtains a

judgment for possession, the landlord must wait for a ten-day appeal period to expire (see

N.C.G.S. § 7A-228) before the landlord can request the issuance of a writ of possession,

allowing the sheriff’s department for the county where the premises are located to

perform a lockout, effectively dispossessing the tenant from the premises. See N.C.G.S.

§ 42-36.2. As a practical matter, many tenants will vacate voluntarily once the landlord

has obtained a judgment for possession, but if the tenant refuses to vacate voluntarily, the

landlord will incur an additional $25 in costs to file for a writ of possession plus $30 in

service fees per defendant for the service of that writ. Depending on how backlogged the

sheriff’s department is, it can take several days for the sheriff’s department to schedule

and implement a padlocking after the writ of possession’s issuance, although the sheriff’s

department is required to execute on the writ within five days. Id. The five-day period

within which the sheriff must execute was reduced from seven days through the North

Carolina General Assembly’s amendment of § 42-36.2(a) in 2013. See N.C.G.S. § 42-

36.2(a) (as amended by Session Law 2013-334).

Chapter 42 contains a provision added in 1995 that many landlords are unaware

of and that can have a major impact on the landlord’s ability to execute on an order for

possession. N.C.G.S. § 42-36.1A provides that if more than 30 days have elapsed since a

judgment for possession of the premises at issue is first entered, then the landlord cannot

execute on the judgment unless the landlord executes an affidavit affirming that the

landlord has not “entered into a formal lease” with the defendant or “accepted rental

money from the defendant for any period of time after entry of the judgment.” This

raises an issue with application of partial payments received by a landlord from the

tenant. In general, a landlord has flexibility to apply payments received to the most aged

overdue amounts first (e.g., to the overdue rent for June before the overdue rent for July),

unless the lease’s terms require a different priority of application. (One notable exception

is that N.C.G.S. § 42-26(b) requires payments to be applied to overdue rent before they

can be applied to charges for sub-metered water and/or sewer services provided to the

tenant by the landlord.)

If the landlord receives a judgment for money owed against a tenant (either

through a combined claim for up to $10,000 owed in a summary ejectment proceeding or

through a separate collections action), the landlord will need to execute via writ of

execution to attempt to collect the money judgment, unless the tenant is willing to

voluntarily pay the judgment. Further discussion of executing on a judgment for money

owed is beyond the scope of these written materials and landlords who recover a

judgment against a tenant for money owed are encouraged to consult with legal counsel

concerning options for collecting on such a judgment.

F. Options Beyond Chapter 42 for Commercial Leases

The summary ejectment procedure prescribed by Chapter 42 of the North

Carolina General Statures (as discussed in detail in the preceding sections) provides the

exclusive remedy for the eviction of tenants in residential lease situations. If a

commercial lease is involved, however, the landlord is not required to proceed under

Chapter 42 to dispossess a tenant, and other options may be available. Usually, however,

the expedited process established by Chapter 42 is impossible to beat from the landlord’s

perspective because the alternative is an action in district court or superior court, which

will proceed far less quickly and inexpensively. Although a commercial landlord might

theoretically obtain preliminary injunctive relief fairly quickly in a district court or

superior court lawsuit, it is usually difficult to impossible for a landlord to establish the

irreparable harm prerequisite for obtaining injunctive relief in North Carolina because

money damages generally will not qualify as “irreparable harm.”

One strategic consideration that could prompt a commercial landlord to bring a

lawsuit to dispossess a tenant in district or superior court (outside of the Chapter 42

paradigm) is that a non-individual tenant (a tenant that is a business entity) cannot appear

pro se in district court or superior court whereas it would be allowed to appear pro se in a

Chapter 42 action in magistrate’s court. This can be of advantage if the landlord has

more extensive resources than the tenant and can better afford the expense that is

associated with retaining counsel and conducting discovery and motions practice (which

are not allowed in a Chapter 42 proceeding). However, the landlord must weigh the

competing consideration that the tenant will have the prerogative to assert a counterclaim

against the landlord in district or superior court, whereas under Chapter 42 (in

magistrate’s court) the tenant is not entitled to counterclaim against the landlord, but

would need to appeal from magistrate court or file a separate proceeding to bring a claim

for damages against the landlord. (As noted above, an action directly against an

unauthorized assignee or sublessee is not within the ambit of Chapter 42, so the landlord

bringing such an action must follow the typical procedural rules applicable to venue and

jurisdiction rather than the summary ejectment procedure.)

An exception in which an alternative to Chapter 42 summary ejectment might be

preferable for a commercial landlord is if the lease at issue explicitly allows the landlord

to engage in forcible entry (also referred to as “self help”) such that the landlord retakes

control of the premises from the tenant in default without invoking legal process,

reentering the premises by breaking locks if necessary, and the landlord is able to do so

without disturbing the peace. See Spinks V. Taylor, 303 N.C. 256 (1981). Accordingly,

if a commercial lease allows the landlord to enter the premises without court order and

change the locks in the event of tenant default, and the landlord is able to do that in the

middle of the night when the premises are deserted or at some other time when the tenant,

the tenant’s employees, and the tenant’s customers are not likely to be present, that is a

valid option for the landlord and it likely will enable the landlord to regain possession

more quickly than a Chapter 42 summary ejectment. That does not mean that such action

is without risk, as the landlord is likely to need to deal with tenant’s possessions

remaining in the premises, and careful handling of the situation is necessary to avoid a

suit by the tenant against the landlord claiming conversion, business losses, breach of the

lease, and unfair and deceptive trade practices (raising the prospect of treble damages and

recovery of attorneys’ fees for the tenant).

Ten days after the North Carolina Supreme Court decided Spinks v. Taylor

generally authorizing self-help remedies for landlords, the North Carolina General

Assembly reacted swiftly “in order to maintain the public peace” and amended Chapter

42 by enacting N.C.G.S. § 42-25.6, which expressly prohibits landlords from using self-

help to evict a residential tenant. “Self-help” for purposes of N.C.G.S. § 42-25.6 includes

constructive eviction measures by the landlord, so, for instance, disconnection of utilities

by the landlord to drive a tenant out is prohibited.