Idaho Real Estate & Development Law Update: Lease Not Modified by Estoppel Certificate or by Long Failure to Exercise Rights

Legal Alert

In the case of Pocatello Hospital v. Quail Ridge Medical Investor released August 1, 2014, the Idaho Supreme Court covered some new ground and revisited some old ground in ruling that a lease was not modified implicitly by the terms an estoppel certificate signed by the landlord or by the landlord’s long failure to increase rent where the lease gave the landlord the right to adjust rent.

New Ground:

“An estoppel certificate is ‘[a] signed statement by a party (such as a tenant or a mortgagee) certifying for another’s benefit that certain facts are correct, such as that a lease exists, that there are no defaults, and that rent is paid to a certain date. A party’s delivery of this statement estops that party from later claiming a different state of facts.’ BLACK’S LAW DICTIONARY 6319 (9th ed. 2009). However, ‘an adverse party may not use an estoppel certificate as a device to make undisclosed changes to [a] lease.’ K’s Merch. Mart, Inc., v. Northgate Ltd., 835 N.E. 2d 965, 972 (Ill. App. Ct. 2005). In other words, if an estoppel certificate does not explicitly modify the terms of the lease, it is not a mechanism by which a lease agreement may be modified.”

“Subjective, undisclosed intent to modify . . . the Lease by deleting language [used by the parties in an earlier] Estoppel Certificate was not sufficient evidence of the parties’ mutual intent to modify the Lease.”

Absent discussions regarding modification of the Lease, a party’s “failure to exercise its rights under the Lease is not conclusive evidence of mutual intent to modify the Lease.”

Mere neglect in exercising rights does not demonstrate a clear intent to waive rights.

“This Court has never held that detrimental reliance, standing alone, is sufficient to establish a claim of waiver.”

Old Ground:

“For modification to take place, ‘the minds of the parties must meet as to any proposed modification’ and the parties must assent to the modification.” Ore-Ida Potato Prods., Inc. v. Larsen, 83 Idaho 290, 296, 362 P.2d 384, 387 (1961).

“One party to a written contract cannot alter the terms of the contract . . . .” Great Plains Equip., Inc., v. Nw. Pipeline Corp., 132 Idaho 754, 769, 979 P.2d 627, 642 (1999).

“The fact of agreement may be implied from a course of conduct in accordance with its existence and assent may be implied from the acts of one party in accordance with the terms of a change proposed by the other.” Ore-Ida Potato, 83 Idaho at 296, 362 P.2d at 387.

“A waiver is a voluntary, intentional relinquishment of a known right or advantage . . . .” Knipe Land Co. v. Robertson, 151 Idaho 449, 457, 259 P.3d 595, 603 (2011) (quoting Fullerton v. Griswold, 142 Idaho 820, 824, 136 P.3d 291, 295 (2006)).

“’Waiver is foremost a question of intent’ and the party proving waiver is required to show a clear intent to waive.” Id. (quoting Seaport Citizens Bank v. Dippel, 112 Idaho 736, 739, 735 P.2d 1047, 1050 (Ct. App. 1987)).

“Waiver will not be inferred from the parties’ conduct absent ‘a clear and unequivocal act manifesting an intent to waive, or from conduct amounting to estoppel.’” Id. at 458, 259 P.3d at 604 (quoting Margaret H. Wayne Trust v. Lipsky, 123 Idaho 253, 256, 846 P.2d 904, 907 (1993)).

“Importantly, the party asserting waiver must also ‘show that he acted in reasonable reliance upon [the waiver] and that he thereby has altered his position to his detriment.’ ” Id. at 457, 259 P.3d at 603 (quoting Fullerton, 142 Idaho at 824, 136 P.3d at 295) (silence insufficient to show intent to waive).

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