The Real Estate Referee – Landlord/Tenant Obligations

Landlord/Tenant Obligations

The Facts

The tenant signed a 10 year lease for 5,000 square feet of office space. For the first 6 years, the tenant enjoyed the building and its amenities and was very pleased with its offices.  In the 7th year, the building maintenance began to rapidly decline. Not only was the exterior of the building improperly maintained, there were also signs that the landlord was not taking care of the interior of the building.  The tenant began to make complaints to the landlord about its failure to maintain the building. In late September of the 7th year of the lease, the roof-top air conditioning units began to fail. Rather than replace the units, the building owner, who had avoided making the repairs, was unable to fix the air conditioning. This resulted in some very uncomfortable days for the Tenant when the Texas sun was high in the sky. Luckily, the temperatures cooled off as the year came to an end. In May of the next year, the air conditioning units died and the landlord did not replace the units or repair them so that they would properly cool the building. Again, the tenant complained to the landlord to no avail. Eventually, the tenant moved out and leased space 2 miles south of the former location.

The Questions

Can the tenant simply move-out of the space and sign another lease when it had 2 years left on the lease for its former space?

Could the landlord neglect to take care of its building and expect the tenant to remain there without incurring some responsibility for its actions, or lack thereof?

Official Ruling

Of course, in any situation where there is a written document that governs the parties (e.g. a written lease agreement or a written contract); the first place to look for an answer is what the parties agreed to in that writing.

The question is whether the landlord, by its actions (or lack thereof), intend that its tenant no longer use or enjoy the leased offices. The landlord’s acts or omissions must be material and substantial interferences with tenant’s use and enjoyment of its offices such that the tenant was permanently deprived of the use and enjoyment of its space. Finally, in order for the tenant to take this sort of position, it must abandon or vacate the space within a reasonable time.

Applying this analysis to the above facts, a “material interference” is one that affects the use for which the property was leased. Obviously, if the property is leased as an office with air conditioning and the air conditioning does not function, that would be “material”. In order to constitute a “substantial interference”, the act or failure to act by the landlord must have actually impeded the use of the leased property by the tenant.

The trickier question concerns whether the tenant was “permanently deprived” of its use and enjoyment of the leased space. Although there is no bright-line test for determining when interference is “permanent”, it is clear that the term does not require that the interference go on forever. While a short-term interference (e.g. an hour, a day, a week) will not usually qualify as “permanent”, a comparison between the length of the interference, the circumstances and the length of the lease are helpful in answering this particular question. Here, the failure to maintain the premises was experienced over a 9 month period of time, culminating in the failure/refusal to fix the air conditioning units.

Finally, the tenant must abandon after a reasonable time. The question of what is reasonable will depend on the circumstances. Here, the tenant did not abandon when the building first began deteriorating due to lack of maintenance. Instead, they made numerous requests to the landlord to make changes to the manner in which it was managing the property. After complaining for more than 9 months, and after occupying the space in unworkable conditions (no AC), the tenant abandoned the premises. The tenant was entitled to move out because it had been constructively evicted.

 

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