## Facts

- 3637 Green Road Company, Ltd. (landlord) leased commercial space to Specialized Component Sales Company, Inc. (tenant) under a written lease that barred oral modifications.
- After the written term expired, the parties continued their relationship as a month-to-month commercial tenancy.
- Years into the tenancy, the tenant told the landlord that a business downturn required it to leave unless the landlord reduced rent from the amount stated in the lease.
- The landlord orally agreed to reduce the rent, and for years thereafter accepted the tenant’s monthly checks at the reduced amount (about $1,473.75) without objecting that the payments were short.
- In 2012, the landlord sought changes relating to the premises and indicated rent would increase; the tenant later vacated the space in late 2012.
- In 2014, the landlord sued in Shaker Heights Municipal Court for breach, seeking unpaid rent and other amounts, contending the tenant owed rent calculated at the higher written-lease rate and for months after the tenant left.
- The tenant denied owing additional rent and sought a credit based on the landlord’s retention of the security deposit and the landlord’s later rental activity.
- After a bench trial, the municipal court entered judgment for the landlord on breach but calculated damages using the reduced rent, limited rent due to the period ending in December 2012, applied the security deposit as a credit against unpaid rent, and awarded the landlord $1,196.50.
- The landlord appealed to the Eighth District Court of Appeals, challenging the reduced-rent calculation, the end date for rent liability, and the security-deposit credit.

## Issues

1. Whether the trial court could enforce an oral rent-reduction agreement where the written lease prohibited oral modifications and the statute of frauds generally requires certain lease terms to be in writing.
2. Whether the tenant owed rent beyond December 2012 after vacating the premises during a month-to-month tenancy.
3. Whether the trial court properly credited the tenant’s security deposit against unpaid rent in calculating damages.

## Decision

- The court of appeals affirmed the judgment.
- The court upheld enforcement of the reduced rent, concluding the landlord’s years-long acceptance of the lower monthly payments constituted waiver by conduct of the no-oral-modification clause, and the parties’ performance supported enforcing the modification notwithstanding the statute of frauds.
- The court affirmed limiting rent liability to December 2012 based on the month-to-month nature of the tenancy and the trial court’s findings regarding the tenant’s departure and the end of the rental obligation.
- The court affirmed applying the security deposit as a credit against unpaid rent because the record did not show the deposit had already been used for rent or other charges, and the trial court’s damages calculation was not reversible error.

## Legal Principles

- A contractual clause barring oral modifications may be waived when a party knowingly accepts and treats a different performance (such as reduced rent) as the parties’ ongoing arrangement over a substantial period.
- An oral modification affecting rent may be enforced when the evidence shows the parties acted on the change and it would be inequitable to allow one party to accept the benefits of the modified performance for years and later demand the original terms retroactively.
- For a month-to-month commercial tenancy, rent liability after a tenant vacates depends on the facts and the parties’ conduct; a court may limit damages to the period tied to the tenant’s occupancy and the proven end of the tenancy.
- A security deposit may be credited against unpaid rent where the evidence supports that the landlord retained the deposit and did not prove it had already been applied to other authorized charges.

## Conclusion

The Eighth District affirmed a limited damages award to the landlord, holding that the landlord’s long acceptance of reduced rent made the oral rent reduction enforceable despite a no-oral-modification clause and statute-of-frauds arguments, that the tenant’s rent obligation ended by December 2012 based on the month-to-month tenancy and the tenant’s departure, and that crediting the security deposit against unpaid rent was proper on the record.


3637 Green Road Co. v. Specialized Component Sales Co., 69 N.E.3d 1083 (2016)