## Facts

- A commercial landlord and an anchor retail tenant were parties to a long-term lease for space in an Arizona shopping center.
- The lease term was 20 years with renewal options extending the potential term to 30 years; annual payments were about $50,000 (base rent plus common-area charges).
- The lease required payment of common-area maintenance charges, typically reconciled annually through a year-end statement.
- The parties’ course of dealing reflected that the tenant commonly paid the year-end adjustment more than 30 days after receiving the statement.
- The lease included a time-is-of-the-essence clause and a default provision allowing termination if the tenant failed to cure nonpayment within 10 days after receiving notice.
- The landlord sent a year-end common-area statement reflecting a balance due of $3,566.44.
- After the tenant questioned the amount, the landlord sent a written demand requiring payment within 10 days of receipt; the tenant received the demand on April 17, 1987.
- The tenant issued a check seven days later and mailed it on April 25, 1987.
- On April 28, 1987 (the eleventh day after receipt of the demand), the landlord sued to terminate the lease and obtain possession; the landlord received the check the next day.
- On cross-motions for summary judgment, the trial court found a breach but deemed it trivial and denied forfeiture; the court of appeals reversed, treating the time-is-of-the-essence clause as making the breach material.

## Issues

1. Whether a trivial or immaterial breach of a commercial lease supports forfeiture of a long-term leasehold.
2. Whether a time-is-of-the-essence clause automatically makes any late payment material, requiring termination when the cure period is missed by a short time.
3. What factors determine whether a late payment default is trivial or material for purposes of enforcing a forfeiture remedy.

## Decision

- The Arizona Supreme Court reversed the court of appeals and reinstated the trial court’s judgment denying forfeiture.
- The court held that trivial or immaterial breaches do not justify forfeiture of a commercial leasehold interest.
- The court concluded the tenant’s short delay in paying the $3,566.44 adjustment was trivial and did not warrant termination.
- The court rejected the view that a time-is-of-the-essence clause conclusively establishes materiality for any late payment.

## Legal Principles

- Forfeiture of a commercial lease is a harsh remedy and is generally unavailable for slight, good-faith defaults that cause little or no prejudice and can be remedied by payment or damages.
- A landlord’s contractual right to terminate for default is subject to a materiality inquiry; termination requires a material breach, not a technical or trivial noncompliance.
- A time-is-of-the-essence provision is relevant to materiality but is not dispositive; it does not transform every brief delay into a material breach warranting forfeiture.
- In assessing triviality or materiality, courts consider the amount of the default in relation to the tenant’s overall obligations, the length of the delay, harm or prejudice to the landlord, the tenant’s good faith, and the parties’ course of dealing.
- Modern lease enforcement incorporates contract doctrines such as substantial performance and material breach, and equitable limits may deny forfeiture where termination would be disproportionate to the default.

## Conclusion

The Arizona Supreme Court held that forfeiture of a commercial lease requires a material breach and that a brief, good-faith late payment of a relatively small common-area charge—causing no meaningful harm—does not justify termination, even when the lease states that time is of the essence.


Found. Dev. Corp. v. Loehmann's, Inc., 163 Ariz. 438, 788 P.2d 1189 (Ariz. 1990)