Landlord/Tenant – Commercial Lease – Statute of Frauds – Oral Rescission – Remaining Term

Where the parties’ lease had, at most, two years and eight months to run, the rescission of the lease was not required to be in writing under the Statute of Frauds.

We vacate judgment for the plaintiff-landlord and remand for further proceedings.

Facts

In 2008, plaintiff’s predecessor leased its property to the defendant-tenant for five years, with the possibility of three renewals of five years each. The lease was renewed twice. According to the tenant, near the end of the second renewal term, the parties agreed to rescind the lease early.

Although the property was listed as available to rent, the landlord later purported to repudiate its agreement to a rescission. After the tenant vacated the premises, the landlord filed suit for unpaid rent.

Analysis

When real property is leased for three or more years, the lease must be in writing, and subsequent oral modifications are ineffectual. However, a “lease which is required by the Statute of Frauds to be in writing may be rescinded orally by the mutual assent of both parties.” Inv. Properties of Asheville, Inc. v. Allen, 281 N.C. 174, 188 S.E.2d 441 (1972), vac’d on other grounds, 283 N.C. 277, 196 S.E.2d 262 (1973). The court has clarified that “a parol offer to surrender a leasehold estate having more than three years to run is within the [S]tatute of [F]rauds and cannot be specifically enforced.” Herring v. Volume Merch., Inc., 249 N.C. 221, 106 S.E.2d 197 (1958).

The parties’ lease was for a term of three years or more, so it was subject to the Statute of Frauds. From the evidence in the record, it is arguable that the parties’ oral agreement or subsequent behavior constituted a valid rescission of the lease. Moreover, when the parties allegedly made their oral rescission agreement, the lease had, at most, two years and eight months to run and was not required to be rescinded in writing under the Statute of Frauds.

The trial court failed to consider whether the parties agreed, by mutual agreement or by inconsistent conduct, to rescind the lease.

Other Issues

Even though the lease was never recorded as required by G.S. § 47-18, an unrecorded lease is nevertheless enforceable against the lessee who is a party to and on actual notice of the lease.

When plaintiff bought the leased premises, it obtained the right to sue for unpaid rent. There was no need for plaintiff to obtain an assignment of the lease from its predecessor-in-interest.

The parties’ lease prohibited the landlord from renting a neighboring unit to another insurance company. Although the landlord rented a neighboring unit to another insurance company, it did so months after the tenant had already vacated the premises and failed to pay rent. The landlord was excused from its obligation to comply with the lease’s restrictive covenant.

Vacated and remanded.

Bell Enterprises, Inc. v. SFI Group, Inc. (Lawyers Weekly No. 012-133-23, 14 pp.) (Jefferson Griffin, J.) Appealed from Pender County District Court (James Faison, J.) Michael Genest for plaintiff; Gary Clemmons and T.R. Cook for defendant. North Carolina Court of Appeals (unpublished)