The Missouri Court of Appeals for the Eastern District recently decided a case involving the damages available under a lease when the tenant engages in illegal activities. The case of Amalaco, LLC, d/b/a MJM Renovation v. Butero, Case No. ED107307 (Mo. App. E.D. December, 17, 2019), involved two Tenants that rented two separate apartments from the Landlord in a building located in University City, Missouri. The Tenants then sub-leased those apartments on AirBNB. The leases signed by the Tenants specified that the Tenants “[s]hall not assign this lease or sublease or rent any portion of the property to anyone else[.]” The leases also stated that “Tenant[s] shall comply with all applicable laws regulating the use of the property” and that “Landlord may terminate [these leases] if Tenant[s]. . .engage in any illegal activity on or in the propert[ies].” Notwithstanding the lease terms, the Tenants subleased the apartments for short-term occupancies through AirBNB, which resulted in the City issuing a citation for violation of a University City ordinance regulating short-term rentals. The Landlord subsequently terminated both leases and sought to collect the money the Tenants received from sub-leasing the apartments through AirBNB.
The trial court found that the Landlord could not recover the money and dismissed the action, and the Landlord appealed. The Court of Appeals held the Landlord was entitled to terminate the leases because the Tenants engaged in illegal conduct. However, according to the Court of Appeals, terminating the leases and reacquiring possession of the properties were the only remedies provided for in the leases and were adequate. Nothing in the leases allowed the Landlord to recover the profits the Tenants received from posting the apartments on AirBNB, and the Court of Appeals therefore affirmed dismissal of Landlord’s claim seeking to recover those profits.
This case provides an excellent example of why it is important to carefully consider the remedies available under leases, and also a good reminder of why it is important for landlords to regularly review the lease form they use as the law and regulation of short-term rentals continues to evolve.