Case Example of Commercial Landlord and Tenant Dispute

Case Example of Commercial Landlord and Tenant Dispute

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With the number of commercial leases out there, a commercial landlord and tenant disagreement is not atypical. However, how the parties react to the disagreement will dictate whether or not the disagreement leads to a full-blown dispute.  Such disputes happen and sometimes are unavoidable.   However, before a disagreement escalates, it is imperative that the parties to the commercial lease re-read their lease and consult with counsel, as necessary, so that they understand their rights.

The case of Griffin Industries, LLC v. Dixie Southland Corp., 162 So.3d 1062 (Fla. 4th DCA 2015) discusses three interesting issues in a commercial landlord and tenant dispute. The first issue is a tenant terminating a lease early based on a constructive eviction argument. The second issue is a tenant trying to take advantage of an early termination provision. And, the last issue is a landlord’s recourse for a tenant terminating its lease prior to the lease’s expiration.  All three issues provide a case example of a commercial landlord and tenant dispute.

In this case, a commercial tenant entered into a 5-year lease for a warehouse. Approximately a year-and-a-half into the commercial lease, the tenant sent the landlord a letter stating it was terminating the lease due to unpermitted and illegal storm water discharges. The tenant vacated the property and did not pay rent thereafter.   The landlord leased the warehouse to another tenant for the balance of the lease term for a sizeable discount. The landlord then sued the tenant for breach of lease.

 

  1. Tenant’s Argument It was Entitled to Terminate the Lease Early due to Constructive Eviction

The tenant argued it was entitled to terminate the lease early due to the illegal storm water discharges. The trial court, however, made no finding of any illegal conditions after trial to warrant this defense, which was really a defense sounded in constructive eviction. “A tenant is not entitled to terminate a lease based on a theory of constructive eviction unless the premises are unsafe, unfit, or unsuitable for occupancy for the purposes for which they there were leased.” Griffin Industries, supra, at 1067.  

Here, even if the storm water drainage system was unpermitted, there was no evidence that this issue actually interfered with the tenant’s operations or of any safety, fitness, or suitability issues with the tenant. The evidence actually showed the landlord was in the process of addressing the issue. Thus, the constructive eviction defense did not apply.

Before a tenant relies on the defense of constructive eviction to terminate a lease, the tenant should seek legal counsel to best preserve its rights moving forward. Otherwise, the tenant could be making a reactionary decision to an issue that actually results in the tenant materially beaching the lease.

 

  1. Tenant’s Argument It was Entitled to Terminate the Lease Early Per the Early Termination Provision

The tenant then argued it was entitled to terminate the lease early per an early termination provision in the commercial lease that allowed it to terminate the lease during month 24 of the lease; the provision further stated that the tenant waived this early termination option if it failed to give the required notice during month 24.  

However, here, the tenant gave the early termination notice early; thus, it failed to properly trigger the early termination option and waived its right to terminate the lease early.

Negotiating an early termination option is actually beneficial to a tenant as it gives the tenant a potential out if it complies with the option that typically includes providing the landlord specific advance notice and continuing to pay rent for a stated period of time to allow the landlord to re-lease the space.

 

  1. Landlord’s Recourse when Tenant Terminates Lease

Finally, the court held that when a tenant breaches or abandons a commercial lease early, the landlord has three options: “The lessor may (1) treat the lease as terminated and retake possession for the lessor’s purposes; (2) hold possession for the lessee’s account, in which case the lessee is responsible for any difference between the rent obligation and amounts the lessor recovers by reletting the premises; or (3) stand by and do nothing and sue the lessee as each installment of rent matures, or sue for all the rents due when the lease expires.Griffin Industries, supra, at 1068 quoting Holiday Furniture Factory Outlet Corp. v. State, Dep’t of Corr., 852 So.2d 926, 928 (Fla. 1st DCA 2003).

Here, the landlord pursued the second option by re-renting the property and suing the tenant for the difference in the balance due under the lease and the amount it received from the new tenant.  This was the right thing to do.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.