What is a Non-Abandonment Agreement?
A non-abandonment agreement is a commonly used contract provision intended to ensure the continued use of an asset or business by preventing abandonment. The definition of non-abandon is simply the opposite of abandon, which means to "cease to use" or "to abandon property, right-debt, etc., means . . . to renounce all title, possession or claim." Black’s Law Dictionary.
A non-abandonment agreement can be included in a variety of agreements, including real estate leases, healthcare or medical practice agreements, or corporate buy/sell agreements. In each of these contexts, the consequences of abandoning the property or business varies.
In real estate leases, as in North Carolina, a landlord can sue a tenant for rent due even after the tenant has abandoned the property or moved out. An abandoned tenant will also lose its security deposit and be held liable for disposing of the property without permission of the landlord. However, if the tenant does not actually give up possession and abandon the property but simply vacates it without giving notice to the landlord, the lease will generally survive, and the tenant will still be liable for rent .
In the context of healthcare or medical practices, the healthcare provider and group may enter into an agreement relating to the group practice of medicine, such as a non-competition or other restrictive covenant. The intent of including a non-abandonment agreement in this context is to protect the group from any physician leaving or abandoning the practice which could impair the practice as a whole. Non-abandonment agreements are frequently used to protect the integrity of medical practices.
In addition, a group of companies and a partner may include a non-abandonment agreement in their governing documents to ensure that a partner or key employee doesn’t leave to compete with the company or potentially impair its value. The non-abandonment agreement in this context may run for a fixed period of years, but can also run indefinitely. As with non-compete or non-solicitation clauses, the parties may want to obtain counsel on the scope and enforceability of the non-abandonment agreement.
Due to the variety of potential uses and contexts for a non-abandonment agreement, outside counsel should be involved in the drafting of such an agreement to determine its proper scope and enforceability.
Requirements in North Carolina
The North Carolina Industrial Commission (NCIC) Rules require Defendants to pay an injured worker who returns to work after injury weekly temporary total or temporary partial disability compensation benefits for the first 90 days that the injured worker is back at work earning pre-injury wages. After this 90-day period, the NCIC Rules require the employer to file an application to determine whether the injured worker has entered into a Non-Abandonment Agreement.
In North Carolina, "[i]t is generally understood that when an employee returns to work without any limitations at full pay he has abandoned his claim for compensation." Pruitt v. Sartomer Co., 367 N.C. 384, 766 S.E.2d 171, 173 (2014). However, North Carolina General Statute §97-32.2 allows for employers to enter into Non-Abandonment Agreements with injured workers which preserves "the right to make further claim for any injury sustained in the accident, regardless of whether the plaintiff has returned to work or as to whether or not the plaintiff is making less money than what he had been making before the accident happened." Id.
The following are the legal requirements for an agreement to be a Non-Abandonment Agreement under North Carolina law:
- (1) The agreement must be in writing;
- (2) The agreement must state that the injured worker returned to work earning pre-injury wages with or without restrictions because the closure of his case had been discussed with him;
- (3) The agreement must include the signature of the injured worker and someone who is authorized to enter into such an agreement on behalf of the Employer;
- (4) The agreement must be filed with the Commissioner within 14 days of the injured worker returning to work.
26 N.C. Admin. Code 10.1101(e); See also Pruitt, Sheppard, and Berrier-Davis decisions.
An application to determine whether an injured worker has entered into a valid Non-Abandonment Agreement must be filed with the NCIC within 180 days from the date that the injured worker returned to work. Pruitt, Sheppard, and Berrier-Davis decisions. Once the application is filed, the NCIC will schedule a hearing. The defendant-Employer must produce the Non-Abandonment Agreement for the NCIC to determine whether it is a valid Non-Abandonment Agreement under the law; however, the NCIC will not review the terms of the agreement.
The Defendant-Employer has the burden of proving that a Non-Abandonment Agreement was validly entered into between the parties. Pruitt, Sheppard, and Berrier-Davis decisions. If the Defendant-Employer fails to meet this burden, the NCIC will hold that the injured worker did not abandon his or her claim.
If the NCIC holds that a Non-Abandonment Agreement was not validly entered into between the parties, the injured worker has the ability to recover temporary total or temporary partial disability compensation benefits for the weeks actually worked at 100% or at less than pre-injury wages for a period of 400 weeks from the date the injured worker sustained the injury by accident.
Common Applications and Examples
Non-abandonment agreements are particularly used in real estate, but they also have applications in other areas such as patient care and contractual agreements between businesses. In the property management sector, managers often use non-abandonment clauses in their lease agreements to prevent what they see as tenants intentionally abandoning renting or leasing agreements while continuing to stay on a property. These agreements are intended to provide greater peace of mind for landlords and clients that their tenants will not be able to walk out on them without paying the rent they owe. Such lease agreements may contain several provisions, one being a notice period specifying how much notice a tenant must give if he or she wishes to vacate the property. In the medical world, physicians and patients often use non-abandonment agreements. Much like property managers call for a notice period from their tenants, doctors require their patients to inform them with an adequate period of time if they wish to find other physicians. This protects both parties, as it is unethical for doctors to refuse treating patients as well as for patients to evade paying medical bills. Yet another application for non-abandonment agreements is within contractual care agreements between businesses. Something along the lines of a non-compete clause in a traditional employment contract, this agreement allows one business to keep a competing company from stealing its employees.
Essential Components of a Non-Abandonment Agreement
In order for a non-abandonment agreement to have any enforceable effect in North Carolina, it must comply with North Carolina and federal laws. The agreement must clearly state that the landlord is permitted to reenter the premises without notice if the tenant is absent from the premises for a specified amount of time. For compliance with state law under NCGS § 42-26(d), the lease itself must contain the non-abandonment provision, and the structure of the leases must be consistent with the Uniform Commercial Code. Generally speaking, a non-abandonment agreement will include the following: 3) A clause requiring the tenant to pay all actual costs, including attorney’s fees, for the landlord to enforce the agreement; 4) A clause allowing the landlord to demand payments due under the lease from the tenant’s surety; 5) A clause allowing the landlord to enter the residence and move the tenant’s possessions to the common area of the apartment complex; 6) A clause allowing the landlord to padlock the tenant’s unit and deny the tenant access to the unit for a specified period of time; 7) A clause allowing the landlord to move the tenant’s possessions to the common area of the apartment complex; 8) A clause permitting the landlord to enter the home and immediately padlock the unit if the tenant is not in the apartment for 48 consecutive hours (as long as the agreement is supported by sufficient consideration and stated in conspicuous language).
Advantages of a Non-Abandonment Agreement
Non-abandonment agreements can be beneficial for both the representative and the estate. If the estate has a responsibility to file a claims list (unlike an estate that was small enough to have no tax liability), the filing of such a list is an affirmative act of the personal representative, and it is the personal representative’s position that he or she personally will be liable for payment of any claims that are accepted. The filing of a non-abandonment agreement relieves the personal representative from the personal liability, because if the personal representative has so contracted, the representative has not abandoned the assets of the estate and the priority of claims against the estate continues to run.
As to claims that are allowed under the statute (on account of funeral bills, administration expenses, debts due for services performed as guardian of a ward , Contractual obligations of the decedent forming an enforceable claim against the estate, abortion claims, etc.) but where the amount of the claim is contested, the filing of a non-abandonment agreement places the burden of proof on the creditor to establish its claim. The creditor cannot complain that his or her claim is not paid where the creditor has failed to estop itself through a non-abandonment agreement.
Non-abandonment agreements also help ensure the distribution of the estate assets to be done with certainty. In Lankford v. Disbrow, 138 N.C. App. 103, 530 S.E. 2d 596 (2000), a will contained a clause allowing the residue of the estate to pour over to a trust created by the will, but that trust was dissolved prior to the settlor’s death. If the non-abandonment agreement had been used in that case, the estate would have been able to distribute directly to the residuary legatee, rather than distribute to the now-defunct trust.
Potential Issues and Solutions
Non-abandonment agreements can be subject to a variety of challenges, both at the time they are negotiated and in their enforcement. A discussion of some of these challenges and potential workarounds will help you craft enforceable non-abandonment agreements that can withstand scrutiny. First, while we talked a lot about the fiduciary duties of the landlord and tenant in the negotiation of a lease, they do not last forever. In those states where fiduciary duties apply to the landlord and tenant (like North Carolina), the relationship ceases once the lease is signed, and they are limited in the language they can use in the lease. Instead of using technical, contractual phrases like "non-abandonment" or "definitional contract provisions", you can perhaps instead use commercially recognized terms that everyone will understand, like "good credit worthiness" and "financial condition". Alternatively, you can describe the concept you are trying to bind the tenant to (solvency, payment behavior, etc.) in lay person’s terms.
Another potential challenge to non-abandonment agreements comes if you need to enforce them in bankruptcy court. Although leases are executory contracts, as a general rule, the debtor in possession must "cure" any defaults in the lease and provide adequate assurance of future performance in order to assume the lease. Because bankruptcy courts do not automatically enforce pre-petition agreements, and some bankruptcy courts consider non-abandonment of the leased premises to be an executory portion of the lease, bankruptcy courts may be reluctant to enforce the non-abandonment agreement against a tenant in bankruptcy if it would be inequitable to do so. One way to counter this is to make the tenant’s obligation to abide by the non-abandonment agreement a separate provision of the lease not tied to cure or adequate assurance of future performance.
Under Georgia-Pacific vesus United States by: United States, 318 F.2d 774 (4th Cir. 1963), an individual is bound by the non-abandonment agreement of a corporation if he or she is the sole shareholder of the corporation excluded from the protection or benefits of the non-abandonment agreement. In this case, the former president sets off a chain of events which results in the corporation abandoning the tenant mix by refusing to consent, and therefore the individual who created this situation, cannot enjoy the benefits of the non-abandonment agreement unless he or she becomes personally liable for the breach of the tenant mix non-abandonment agreement by the corporation. Similarly, if you have a non-abandonment agreement that binds an individual as a guarantor of the lease agreement between the tenant and landlord, upon death of the individual, the individual’s estate may not be bound by the non-abandonment agreement.
How to Create a Non-Abandonment Agreement
When initiating the preparation of a non-abandonment agreement in North Carolina, it is best practice to first consult with a lawyer who has experience in drafting these agreements and/or family law in general. This will allow the lawyer to ask about the current living/school situation, any prior agreements that the parties may have or are currently operating under, and whether there are any additional landlords at the property. After discussing these consideration, the lawyer can advise the client on the form of the non-abandonment agreement as well as guide the client on the correct process in which to have the agreement drafted and signed.
In drafting the non-abandonment agreement, the lawyer will include language addressing the following:
- The date on which the agreement is signed.
- The parties involved in the agreement. It is also important to include if the agreement does not apply to third-party owners of the property. For example, if a grandparent is the owner of the property and it is agreed that the third-party owner is not included in the agreement, then it should be clearly stated in the agreement.
- The legal address of the property and/or any other location that the agreement will apply to.
- A provision addressing when and how rent shall be paid.
- Mention whether the tenant(s) has/has not previously rented from the landlord. If they have rented before, mention if the tenant(s) maintained good standing by meeting all financial obligations and did not conduct themselves in a way that disturbed other tenants.
- If there are any maintenance requests, specify the types of requests that can be made. For instance, if each request must be in writing or if they can be made orally.
- If the security deposit is being held by someone other than the landlord, then include the name and mailing address of the person holding the deposit.
- Last but certainly not least, make sure the non-abandonment agreement is signed and dated by both the tenant and landlord.
If there are any modifications to the above provisions, it is prudent to consult with an attorney to ensure that the modifications are legal in North Carolina. It is also advisable to consult with an attorney if there are any questions about whether a tenant qualifies for a non-abandonment agreement or if there are questions about drafting and executing a non-abandonment term lease agreement.
Commonly Asked Questions
FAQ’s
What is a non-abandonment agreement in North Carolina, and how does it differ from a non-suit agreement?
In North Carolina, we call these agreements "non-abandonment agreements", while other states refer to them as "non-suit" agreements. There is no difference in what these agreements do and how they work, only the name of the agreement itself.
Who holds the non-abandonment agreement?
The injured person (the patient) must sign the agreement and the medical provider (i.e., doctor, physical therapist, therapist, chiropractor) will hold the agreement. Both the patient and medical provider must sign and date the agreement.
How does a non-abandonment agreement work?
There are many nuances and variations of non-abandonment agreements. Most, if not all, non-abandonment agreements will state that only the patient can ever terminate the agreement. This means that only the injured person can ever say that they are finished with treatment. In addition, under the agreement, the medical provider will always keep sending bills, medical records, bills of costs, and medical expenses to the injured person after their treatment is completed and until a settlement or a verdict is reached for the case. This usually continues even after the insurance company has made a lowball settlement offer to the injured person, meaning that it can outlive the lifetime of the case itself.
In addition , under North Carolina law, the medical provider may never ask the patient to pay out-of-pocket. For example, if the medical provider billed $1,000 but agreed to only accept $200 from the settlement or verdict, the medical provider cannot charge any portion of the $800 difference to the patient.
May I still go to a different medical provider for future treatment?
Yes, the patient is not forced to be treated by that one medical provider, and it is very clear in the non-abandonment agreement that the patient may continue to go see their other medical providers. The non-abandonment agreement only covers medical expenses related to the injuries in the case and nothing else.
May I still refuse treatment on my own?
Yes, the patient may still refuse treatment from the medical provider and the medical provider does not have to treat the patient.
How long can the non-abandonment agreement last?
For us, these agreements last until the case settles or is concluded in court. Once that happens, the medical provider will send a statement indicating that the medical expenses are "final" (loading) and the medical provider will forever give up their ability to collect any more money from the patient. If the case takes a long time to conclude or if the medical provider passes away before the case is resolved, then the agreement will end at that time.