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01/20/94 MIDLAND MANAGEMENT COMPANY v. RONALD

January 20, 1994

MIDLAND MANAGEMENT COMPANY, APPELLANT,
v.
RONALD HELGASON, APPELLEE.



Freeman, Heiple

The opinion of the court was delivered by: Freeman

JUSTICE FREEMAN delivered the opinion of the court:

Plaintiff, Midland Management Company (Midland), as landlord, appeals from the appellate court's affirmance of the circuit court of Kane County's determination that Midland waived its right to assert a forcible entry and detainer action by accepting Federal housing assistance payments, made on behalf of defendant, Ronald Helgason.

FACTS

Defendant entered into a written lease agreement with Midland for the lease of a residential unit at Harbor Village Apartments in Aurora. Defendant's tenancy was subsidized under section 8 of the United States Housing Act of 1937 (Section 8) (42 U.S.C. § 8 (1991).) As a result of the subsidy, defendant was required to pay a total monthly rent amount of $6. The remainder of the fair market rent value for the unit was to be paid under Section 8 in the form of a housing assistance payment.

Pursuant to the lease agreement, defendant, as tenant, agreed to pay the costs of repairs for damage to the property resulting from his carelessness, misuse or neglect. On April 3, 1991, Midland served defendant with a demand for reimbursement for the repair of defendant's water-damaged floor. Defendant refused the demand and, subsequently, tendered his $6 monthly rental payment to Midland.

On May 15, 1991, Midland served defendant with notice of termination of the tenancy for failure to reimburse for the water-damage repair and also returned defendant's rent. Midland, however, continued to receive Section 8 housing assistance payments through August 1991.

When defendant failed to vacate the leasehold pursuant to the termination notice, Midland brought an action in forcible entry and detainer. (Ill. Rev. Stat. 1991, ch. 110, par. 9-101 et seq.) The trial court entered judgment for Midland, and awarded it possession, damages, and costs. Subsequently, however, the trial court granted defendant's motion to vacate the judgment, ruling that, inter alia, Midland's continued acceptance of the housing assistance payments subsequent to serving notice of termination of the tenancy constituted waiver of the breach of the lease as a matter of law.

The appellate court affirmed (241 Ill. App. 3d 899), and we granted Midland's petition for leave to appeal (134 Ill. 2d R. 315(a)). We now reverse that decision.

Section 8

Prior to our Discussion, we deem it necessary to discuss the nature of the Section 8 rent subsidy program and housing assistance payments. Section 8 is a Federal housing subsidy program administered by the United States Department of Housing and Urban Development (HUD). (42 U.S.C. § 1437f (1991).) Section 1437f(a) provides, in pertinent part:

"For the purpose of aiding low-income families in obtaining a decent place to live and of promoting economically mixed housing, assistance payments may be made with respect to existing housing * * *." (42 U.S.C. § 1437f(a) (1991).)

To that end, HUD is authorized to enter into housing assistance payment contracts with owners of housing in which some or all of the units shall be available for occupancy by low-income families. See 42 U.S.C. § 1437f(b) (1991).

Housing assistance payment contracts establish the maximum monthly rent which the owner is "entitled" to receive for each dwelling unit with respect to which such "housing assistance payments" are to be made. (Emphasis added.) (42 U.S.C. § 1437f(c)(1) (1991).) Pursuant to the Code, the assistance contract shall provide that assistance payments may be made only with respect to a dwelling unit under lease for occupancy by a family found to be a low-income family at the time it initially occupied such dwelling unit. However, vacancy payments may be made with respect to unoccupied units for a period not exceeding 60 days in the event that a family vacates a dwelling unit before the expiration date of the lease for occupancy or where a good-faith effort is being made to fill an unoccupied unit. 42 U.S.C. § 1437f(4) (1991).

For Section 8 purposes, HUD utilizes a formula to determine the rental value of a housing unit based upon a fair market rental value in the nonsubsidized housing market. (42 U.S.C. § 1437f(c)(1) (1991).) A tenant, eligible to participate in the Section 8 program, pays a portion of the market rental value, or rent, based upon his income. (See 42 U.S.C. § 1437a(a)1) (1991); East Lake Management & Development Corp. v. Irvin (1990), 195 Ill. App. 3d 196, 199, 551 N.E.2d 272.) The amount of the monthly assistance payment is the difference between the maximum monthly rent which the contract provides that the owner is to receive for the unit and the rent the family is required to pay under section 1437a(a). 42 U.S.C. § 1437f(3)(A) (1991); East Lake Management, 195 Ill. App. 3d at 199.

Discussion

The singular issue which we decide is whether Midland's acceptance of Section 8 housing assistance payments resulted in a waiver of its right to forfeiture of the lease.

It has long been established that any act of a landlord which affirms the existence of a lease and recognizes a tenant as his lessee after the landlord has knowledge of a breach of lease results in the landlord's waiving his right to forfeiture of the lease. ( Vintaloro v. Pappas (1923), 310 Ill. 115, 117, 141 N.E. 377.) Simply put, evidence of acts inconsistent with a declaration of a termination of the lease may prove waiver of the breach, which operates to reinstate the lease. (See Simmons v. Berryman (1930), 342 Ill. 274, 278, 174 N.E. 410.) Acceptance of rent accruing subsequent to a breach is one such inconsistent act. (See Weiss v. Johnson (1963), 28 Ill. 2d 259, 261, 190 N.E.2d 834.) It is immaterial by whom the rent is paid if it is received as rent and on behalf of the lessee. 51C C.J.S. Landlord & Tenant § 117(4) (1968).

Defendant contends that the appellate court correctly held that Section 8 housing assistance payments constitute rent, the continued acceptance of which resulted in a waiver of Midland's right to forfeiture. We note that our appellate court, sitting in the first district, has held otherwise. See East Lake Management & Development Corp. v. Irvin (1990), 195 Ill. App. 3d 196, 551 N.E.2d 272.

We agree, for various reasons, with the decision in East Lake Management that the assistance payments do not constitute rent. The most compelling of these reasons is our construction of the lease agreement between Midland and defendant. (Cf. National Corp. for Housing Partnerships v. Chapman (1984), 18 Ohio App. 3d 104, 481 N.E.2d 654 (in determining that housing assistance payment was not rent, court examined terms of landlord/tenant agreement and also determined that because assistance was not personal to tenant, it was not rent).) Significantly, HUD is not a party to the lease agreement, and, incidentally, there is no contention that defendant is a party to the housing assistance payment contract between HUD) and Midland.

A lease is an agreement which gives rise to the relationship of landlord and tenant. (24 Ill. L. & Prac. Landlord & Tenant § 2 (1980).) It is essentially a type of contract (lllinois Central R.R. Co. v. Michigan Central R.R. Co. (1958), 18 Ill. App. 2d 462, 484), and, as such, it is governed by the rules which govern contracts generally ( Design Studio International, Inc. v. Chicago Title & Trust Co. (1989), 185 Ill. App. 3d 797, 802, 541 N.E.2d 1166; 51C C.J.S. Landlord & Tenant § 202(2) (1969)). "Wherever there is a contract its terms must control the rights of the parties." ( Fichter v. Milk Wagon Drivers' Union, Local 753 (1943), 382 Ill. 91, 100.) Thus, we believe that regardless of our characterization of the housing assistance payment, the rights and obligations of defendant and Midland are controlled by the terms of their agreement. Conceivably, even if such payments constitute rent, parties entering into a lease agreement would, nonetheless, be free to agree on the effect of the landlord's acceptance of such payments after a tenant's breach.

The principal function of the court in construing a lease is to give effect to the intention of the parties as expressed in the language of the document when read as a whole. (See Dix Mutual Insurance Co. v. LaFramboise (1992), 149 Ill. 2d 314, 320, 597 N.E.2d 622.) Relevant to Disposition of the issue now before us is whether the parties intended that housing assistance payments constitute rent. We note that the lease agreement included in the record recites neither the most current term of the lease nor the most current ...


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