When a commercial tenant fails to pay rent, a landlord may have several potential remedies. But if the landlord waits too long, can it still use the unpaid rent to evict the tenant through an unlawful detainer action?
A new California Court of Appeal decision says there is an important one-year limit.
In Universal Shopping Plaza v. Hong, decided on September 9, 2026, the Court of Appeal held that a commercial landlord could not use rent that became due more than one year earlier as the sole basis for a three-day notice to pay rent or quit.
The landlord may still have a claim to recover the money. But the expedited unlawful detainer process is different.
What Happened in Universal Shopping Plaza?
The case involved a restaurant tenant in San Gabriel.
The tenant and landlord originally entered into a five-year commercial lease. After the lease expired, the tenancy continued on a month-to-month basis.
A dispute later arose over a rent reduction that the tenant believed had been promised because of difficulties associated with the COVID-19 pandemic.
Based on that dispute, the tenant withheld approximately $65,989 by paying no rent in January 2023 and reducing his February 2023 payment.
After that, however, the tenant resumed paying the full monthly rent. He continued making monthly payments for approximately two years, through February 2025.
Then, on February 12, 2025, the landlord served a three-day notice to pay rent or quit demanding the same $65,989 that had originally been withheld in early 2023.
When the tenant did not pay, the landlord filed an unlawful detainer action seeking possession of the property and damages.
The Landlord Had an Argument
The case was not as simple as saying that the unpaid rent was two years old.
The lease contained a provision stating that payments received from the tenant would be applied to the tenant’s oldest outstanding payment obligation.
The landlord therefore argued that every later monthly payment should first be applied to the older unpaid balance.
Under that theory, the tenant remained continually behind on rent. Although the original missed payment occurred in 2023, the landlord argued that the tenant was effectively missing a current payment every month.
The trial court agreed. After trial, the landlord obtained possession, $65,989 in past-due rent, and $123,111 in holdover damages.
The tenant appealed.
What Did the Court of Appeal Decide?
The Court of Appeal reversed.
California Code of Civil Procedure section 1161(2) requires the three-day notice at issue to be served within one year after the rent becomes due.
The Court focused on when the rent actually became due, not on how the landlord later allocated subsequent payments under the lease.
The unpaid rent in this case arose from the January and February 2023 payments. The landlord did not serve its three-day notice until February 2025. That was too late.
The Court rejected the argument that the lease’s payment-allocation provision could continually move the old unpaid rent forward and transform it into a new default every month.
According to the Court, that interpretation would undermine the purpose of the one-year requirement by allowing a landlord to wait for years and then use an old rent default to pursue a summary eviction.
Because the entire amount demanded in the notice had become due more than one year earlier, the notice was invalid and could not support the unlawful detainer judgment.
Does That Mean the Tenant No Longer Owes the Rent?
Not necessarily. This is an important distinction in the decision.
The Court did not hold that old unpaid rent simply disappears after one year.
Instead, the one-year rule limits the landlord’s ability to use that old rent as the basis for the expedited unlawful detainer procedure.
The Court specifically noted that the landlord may still pursue a breach-of-contract action to recover unpaid rent, assuming the claim is otherwise timely.
So there are really two different questions. Can the landlord sue to recover the unpaid money? And can the landlord use that unpaid money to support a three-day notice and summary eviction?
Universal Shopping Plaza demonstrates that the answers may be different.
Why the One-Year Rule Matters
Unlawful detainer is designed to be a fast procedure for resolving the right to possession of property.
Because the process moves much faster than an ordinary civil lawsuit, California courts require landlords to comply strictly with the statutory requirements.
The Court explained that the one-year limitation prevents a landlord from sitting on an old rent default and later using it to force an eviction through the expedited unlawful detainer process.
That principle can be especially important in long-term commercial relationships.
A landlord and tenant may continue doing business for months or years after a payment dispute arises. The landlord may continue accepting rent while maintaining that an older balance remains unpaid.
But if the landlord later decides to pursue eviction, it cannot necessarily rely on that old balance for a three-day notice.
The Practical Lesson for Commercial Landlords and Tenants
For commercial landlords, the case is a reminder that old rent disputes should not simply remain unresolved on a ledger indefinitely if the landlord may eventually want to rely on that default to recover possession.
Contract provisions concerning how payments are allocated may affect the parties’ financial obligations, but they do not necessarily override the statutory requirements governing unlawful detainer.
For commercial tenants, the decision is equally important.
Receiving a three-day notice does not automatically mean the notice is legally sufficient. The amount demanded, when the rent became due, and the basis for the alleged default can all matter.
And for both sides, the case illustrates an important distinction between the right to collect money and the right to use an expedited eviction procedure.
A landlord may still have a valid monetary claim while no longer being entitled to use that particular debt as the basis for unlawful detainer.
Universal Shopping Plaza v. Hong is therefore a useful reminder that in commercial lease disputes, timing can affect not only whether a claim exists, but also which remedy remains available.
Legal Authorities
- California Code of Civil Procedure § 1161(2)
- Universal Shopping Plaza v. Hong (Cal. Ct. App., 2d Dist., Div. 7, Sept. 9, 2026)
Related practice areas: Commercial Real Estate Disputes · Real Estate