Tenant's Requirement to Maintain Premises in First Class Condition

Tenant’s Requirement to Maintain Premises in First Class Condition

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Commercial leases oftentimes require the tenant to maintain the premises in first class condition.   The onus is on the tenant to make the necessary repairs as required by the lease keep the premises in a first class condition with perhaps a carve-out for routine wear and tear. Perhaps this is a negotiating point when ironing out the details in the lease (with respect to the scope of the clause), but this is likely a clause in the lease and an important clause as it will impact how a tenant leaves the premises when it vacates.  Don’t overlook this point.  It is an important point and consideration for both landlords and tenants. 

In Apple Glen Investors, L.P. v. Express Scripts, Inc., 700 Fed.Appx. 935 (11th Cir. 2017), a commercial landlord claimed its former tenant breached a commercial lease by failing to maintain, keep, and return property and equipment in the condition required by the lease.

The commercial lease contained the following applicable clauses:

12(a) Tenant shall at all times, at Tenant’s sole cost and expense, put, keep and maintain the Leased Premises (including, without limitation, the parking areas, roof, footings, foundations, interior and exterior walls and structural components of the Leased Premises) and the Equipment in a first class condition and order of repair, except for ordinary wear and tear, and shall promptly make all repairs and replacements of every kind and nature, whether foreseen or unforeseen, which may be required to be made upon or in connection with the Leased Premises in order to keep and maintain the Leased Premises in the order and condition required by this Paragraph 12(a)…. Tenant shall, in all events make all repairs for which it is responsible hereunder promptly, and all repairs shall be in good, proper and workmanlike manner.

12(d) Tenant shall from time to time replace with other operational equipment or parts (the “Replacement Equipment”) any of the Equipment (the “Replaced Equipment”) which shall have become worn out or unusable for the purpose for which it is intended, or been lost, stolen, damaged or destroyed as provided in Paragraph 15.

The landlord asserted 26 deficiencies including landscaping and irrigation, sidewalks, asphalt paving, and security systems due to the former tenant’s failure to maintain and replace property and equipment, or the removal of equipment when the tenant vacated, as required by the lease.

During the trial, the landlord introduced expert testimony to opine whether “the named conditions breached the lease’s requirements that the premises and equipment remain in ‘first class condition,’ excepting ‘ordinary wear and tear,’ and that the tenant replace ‘worn out or unusable’ equipment. Apple Glen Investors, L.P., 700 Fed.Appx. at 938.   In this manner, the landlord’s expert discussed industry standards to explain his reasoning for opining whether the conditions met the lease’s requirements.  

The tenant objected to this expert opinion as impermissible extrinsic evidence used to interpret the meaning of the lease. The trial court nevertheless found in favor of the landlord. The Eleventh Circuit, on appeal, affirmed the trial court ruling that the trial court permissibly allowed extrinsic evidence in the form of the expert opinion to explain the contract’s terms:

Florida law allows courts to consider extrinsic evidence of course of performance, course of dealing, or usage of trade to explain or supplement a contract’s terms, even when those terms are not ambiguous, as long as the evidence is not used to contradict the contract’s terms.  Florida courts have also recognized that “evidence to show the meaning of technical terms, and the like, is not regarded as an exception to the parol evidence rule, because it does not contradict or vary the written instrument, but simply places the court in the position of the parties when they made the contract….”

Apple Glen Investors, L.P., 700 Fed.Appx. at 939.

A tenant’s obligation to maintain the premises is not unique. The tenant may be interested in the scope of the provision so that it is not over broad or impose on it a potentially unreasonable or extremely costly endeavor.  On the other hand, a landlord is not interested in a tenant completely damaging the premises without any obligation on the tenant–the one utilizing the premises–to restore the premises as required in good working order.

 

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.