Opinion ID: 485541
Heading Depth: 2
Heading Rank: 3

Heading: Interest on Delinquent Payments

Text: 24 Plaintiff failed to pay interest due to Papo arising from its delinquent payment of rent. Again, Papo never asserted that this failure to make delinquent interest payments amounted to a material default that would prevent Olga's exercise of the option. As in the case of the late rental payments, Papo was held to have waived application of the no waiver clause. Unlike the late payments, which default Papo excused by repeated acceptance, Olga's failure to make the interest payments continued until trial and placed Olga's in breach. The issue becomes whether that breach was material and thereby would prevent Olga's from exercising the option. 25 Materiality of a breach, like the existence of a waiver, presents a fact question to be resolved by the factfinder. Jameson v. Foster, 646 P.2d 955, 957 (Colo.Ct.App.1982). If a breach is not substantial, a lessee is not prevented from exercising an option. Id. at 957-58. In determining whether a default is material, a court should consider whether the landlord has been harmed or prejudiced and whether the tenant has acted in good faith. 1014 Fifth Avenue Realty Corp. v. Manhattan Realty Co., 111 A.D.2d 78, 489 N.Y.S.2d 204, 205 (N.Y.Sup.Ct.1985). Further consideration is given to the tenant's resulting forfeiture if specific performance was denied. Id. (equity will intervene to prevent a forfeiture occasioned by a trivial or technical breach). Thus, when the  'allegations are de minimis in nature,' and the landlord 'has failed to show any prejudice resulting from the tenant's alleged breach of the terms of the lease,'  a material breach may not have occurred and specific performance should be ordered. Id. at 206, quoting Restoration Realty Corp. v. Robero, 58 N.Y.2d 1089, 1091, 462 N.Y.S.2d 811, 449 N.E.2d 705 (1983). 26 Papo showed no real prejudice by reason of late interest payments; when Olga's paid off the interest after judgment was entered, Papo was fully compensated. Bad faith on Olga's part was not demonstrated. Moreover, the trial court took judicial notice that the amount of interest owed was relatively insignificant in comparison to the approximately $540,000.00 already paid as rent. We find no error in the district court's finding no material breach in Olga's failure to pay interest payments amounting to approximately 2% of the total rent (or finance) payments made. Forfeiture in this case would work substantial inequity, considering the additional finding that the arrangement between the parties was not, in reality, a lease but rather an equipment financing agreement.