Landlords Beware: Court Rules that a New Owner's Failure to Give a Tenant Timely Notice of the Purchase of Rental Property Bars Action for Unpaid Rent

Contact: Pat McLaughlin; Spencer Fane Britt & Browne LLP (Missouri, USA - TAGLaw)

Thinking about buying rental property in Missouri? If you are, make sure you review all relevant statutes or, better yet, give us a call.

The recent opinion handed down by the Missouri Court of Appeals in Investors Alliance, LLC v. Bordeaux, No. ED99804 (April 15, 2014), serves as a cautionary tale for unwary buyers of rental properties. On November 18, 2011, the defendant, Bordeaux, signed a one year lease for residential property in the city of St. Louis for $750 a month. The current owner sold the property to the plaintiff, Investors Alliance, 12 days later. During the lease, Bordeaux stopped paying rent because of maintenance issues. In June 2012, Investors Alliance sent Bordeaux a letter notifying her that rent should be submitted to Plaintiff. Bordeaux failed to pay rent from June through November, 2012.

In August 2012, Investors Alliance filed an action for rent and possession under sections 535.010 and 535.020 of the Revised Statutes of Missouri, which permit a landlord to recover possession of the premises and any unpaid rent. An associate circuit judge entered an order granting Investors Alliance possession of the property and $6,200 for unpaid rent, late fees and attorney fees. Bordeaux was subsequently evicted. Case closed, right?

Not so fast. First, Bordeaux timely failed a petition for a trial de novo (new trial), which is her right under Missouri civil procedure. At the hearing, Bordeaux argued that Investors Alliance was not entitled to recover the unpaid rent because Investors Alliance failed to give her notice of the property's transfer of ownership as required by § 535.081. Investors Alliance admitted it did not provide her the required notice, but argued that the notice was not a required element of proof for the recovery of rent under § 535.081. The trial court concluded that the lack of notice did not preclude recovery of unpaid rent because notice was not an element of the action under § 535.090 and the covenant to pay rent runs with the land under a prior Missouri case dealing with a common law claim for unpaid rent. As a result, judgment was again entered in favor of Investors Alliance for possession and unpaid rent.

On appeal, the sole issue was again whether the lack of notice of the transfer of ownership of the rental property precluded recovery of unpaid rent. The appellate court, noting that no previous case had applied or interpreted the notice requirement of § 535.081, indicated that its primary task was to analyze the plain language of the statute to discern the legislature's intent. When statutory language is clear and unambiguous, the court must apply the language as written "“ even if the result is harsh. Unfortunately for Investors Alliance, the court concluded that the legislature's use of the terms "requires" and "shall," indicates a clear intent that in order to recover rent under § 535.070, notice of the purchase of the property must be given under § 535.081. Moreover, the court found the prior Missouri case holding that the covenant to pay rent ran with the land was not applicable because it dealt with a common law claim for rent, not one based on the statutes at issue here. Accordingly, the appellate court reversed, finding that Investors Alliance was not entitled to recover the unpaid rent.

While this was surely an expensive lesson for Investors Alliance, it should serve as a reminder to rental property investors to comply with all applicable statutes. We can help "“ we actively represent landlords and rental property owners in St. Louis metropolitan area "“ including southern Illinois.