Piong Bin Hong owns the Five Star Restaurant. On December 19, 2016, Hong and Universal Shopping Plaza entered into a five-year lease for space in Universal’s shopping center, starting January 1, 2017, with a month-to-month tenancy thereafter.
The Lease required that Hong pay base rent of approximately $30k per month on the first day of each month, with 3% annual increases. The Lease allowed Universal to apply payments to the oldest obligations owed by Hong.
Hong did not make a rental payment in January 2023 because he believed he was entitled to a discount based on a conversation he had with Universal’s leasing and office manager. The offset was offered due to challenges resulting from the COVID-19 pandemic.
As a consequence and due to the offset, Hong’s rental payment for February 2023 was also reduced. But Hong fully paid rent for March 2023 and continuing thereafter for almost two more years.
Following Hong’s rental payment in February 2025, Universal served a notice to pay or vacate, claiming that Hong had breached the Lease by failure to timely pay rent. When no further funds were paid, Universal filed an eviction complaint on February 25, 2025.
Hong defended, arguing that he had fully paid all rent, after the discount was applied. But Universal contended that Hong’s oral agreement was not binding, as the Lease required that all agreements must be in writing. And since there was no written agreement reducing or abating the rent, Hong defaulted by failure to pay full rent in January and February 2023.
The trial court entered judgment for Universal. Hong appealed.
The Appellate Court reviewed the eviction statutes and particularly the notice requirements. The notice must be served within one year after rent is due. The Court reached into legislative history to add that the law “prevents a landlord’s sitting on his or her rights, when rent is unpaid at some point during the life of a lease, then using long-overdue rent (but no recently overdue rent) to effect an eviction.”
Universal contended that all rent payments made by Hong in 2023 and after were applied first to delinquent rent, which meant that Hong was always in default for the last several years. As a consequence, Universal argued it had the right to take no action for years, then pursue eviction due to Hong’s breach of the Lease.
The Appellate Court was unwilling to allow Universal to do so. Despite the written agreement of the parties that all payments would be applied first to the oldest debts, the Court determined that a landlord may not use a payment-application clause to keep a stale default alive for eviction purposes. If no rent default occurred within the preceding 12 months, the landlord has no right to evict.
Universal could still, however, pursue an action against Hong for breach of contract and resultant damages, provided it did so within the applicable statute of limitations.
But not evict.
The judgment of the trial court is reversed. Hong wins. Universal loses, although Universal can return to court and seek a judgment for money damages.
The lesson for landlords: a rent shortfall should be addressed promptly. Wait more than a year, and a payment-application clause will not preserve the right to evict; the landlord may be left with only a suit for damages.
See Universal Shopping Plaza v. Hong; California Court of Appeal, 2nd Appellate District, Division Seven; Case B348490; September 9, 2026: https://law.justia.com/cases/california/court-of-appeal/2026/b348490.html.
Stuart A. Lautin, Esq.*
* Board Certified, Commercial and Residential Real Estate Law, Texas Board of Legal Specialization
Licensed in the States of Texas and New York