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COA: Landlord must close on sale of rental property

November 21, 2017

A Hendricks County landlord must close on the sale of her property to a tenant after the Indiana Court of Appeals ruled Tuesday there was no breach of a lease agreement preventing the enforcement of an Option to Purchase Real Estate Agreement.

In December 2015, Robin King and Rebecca Conley entered into a lease agreement and Option to Purchase Real Estate Agreement that gave Conley an exclusive and irrevocable option to purchase a residential home from King. Conley paid King $13,000 pursuant to the option agreement.

The one-year lease agreement included a provision that prohibited Conley from making any changes to the leased premises with obtaining written consent from King. Additionally, the option agreement held King could terminate it if Conley was found in default.

About three months later, Conley reported a leak to King, who accessed the house and speculated that Conley could have caused a problem. Conley was concerned by that speculation, so she decided King could not enter the house unless someone else was present and changed the locks.

Conley then sent King a letter on March 25 notifying her that she was exercising her option to purchase the property. King also wrote a letter on March 30 telling Conley she had violated the lease agreement by painting the walls, replacing the locks and removing plants and giving her 15 days to correct the violations.

King then filed a complaint against Conley alleging breach of the lease, then moved for eviction on the same grounds. Conley responded with a counterclaim for specific performance of the option requiring King to close the transaction and requesting attorney fees.

The Hendricks Superior Court ultimately ruled in favor of Conley, noting in its findings that Conley had texted King about changing the color of the walls, and King had responded by saying she would be envious when she saw them. Thus, the trial court found neither the painting nor the changing of the locks – which the judge deemed reasonable – was a material breach of contract.

Further, because Conley timely submitted notice of her intent to exercise the option to King, she was entitled to specific performance.  The trial court then denied the motion for eviction, ordered King to close on the transaction and granted Conley’s request for attorney fees.

King appealed in Robin King v. Rebecca Conley, 32A01-1612-PL-2670, but the Indiana Court of Appeals affirmed the trial court’s decision on Tuesday. Specifically, Judge Elaine Brown wrote the evidence established Conley never failed to pay her rent on time and supported the trial court’s finding that at the time Conley exercised the option, King had not yet served her with notice of breach of the lease.

Brown further wrote the evidence supported the trial court’s findings that painting and changing the locks were not material breaches of the lease considering King did not suffer a significant loss and the alterations became part of the property, which Conley would retain if she exercised the option as she did.

The appellate court also upheld the grant of attorney fees and remanded the case for the determination of reasonable fees.

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