Enough Is Enough! The Scope of the 'Perpetual' Right to Cure

The Common Law Doctrine of Constructive Eviction

Generally, the landlord has the duty to repair the premises. When the landlord's failure to repair makes the premises unfit for the tenant to carry on its everyday business and the premises cannot be made tenable by ordinary repairs without causing unreasonable interruption to the tenant's business, the tenant may terminate the lease. The burden of proving that the premises are uninhabitable is a heavy one for the tenant, and begs many questions, such as, “What is everyday business?”; “What are ordinary repairs?”; and “What is an unreasonable interruption?” Historically, tenants have been somewhat disadvantaged by the law in this area because the common law treats the covenant to pay rent and the covenant to repair as independent covenants. Grant EL: Disturbing Concepts: Quiet Enjoyment and Constructive Eviction in the Modern Commercial Lease. 35 Real Property, Probate and Trust Journal 57 (Spring 2000); Lewis & Co. v. Chisolm, 68 Ga. 40 (1881) (covenant to repair and covenant to pay rent are independent covenants and therefore failure to repair does not work a forfeiture of rent). Therefore, under the common law, the tenant cannot simply withhold its rent if the landlord fails to keep the premises in good condition. The remedy for a landlord's failure to repair is either for the tenant to repair the premises itself and offset the cost of repair against its rent, or for the tenant to do nothing and then sue the landlord for damages caused by the failure to repair. It is only in the most egregious situations that the tenant is permitted to terminate the lease under the doctrine of constructive eviction without regard to the landlord's right to cure. W. Broadway Glass Co. v. I.T.M. Bar, Inc., 658 N.Y.S.2d 162 (N.Y.App. Term. 1996) (a constructive eviction exists where a landlord's acts substantially and materially deprive the tenant of the beneficial use of the premises) aff'd 666 N.Y.S.2d 629 (N.Y.App. Div. 1997); Roseville Props. Mgmt. Co. v. DiMed Corp., No. C8-93-2501, 1994 WL 396350 (Minn. App. Aug. 2 1994) (constructive eviction must be something of a grave and permanent character which deprives the tenant of the use, occupation and enjoyment of premises), (quoting Donaldson v. Mona Motor Oil Co., 193 Minn. 283, 286, (1935)).

Many states have enacted statutes to protect one party in a transaction from the other party's potential abuse of the right to cure defects in other areas of the law. For example, the Magnuson Moss Warranty ' Federal Trade Improvement Act governs express warranties on consumer products, and there are various applicable UCC provisions in each state. In the consumer product area, the law clearly gives the buyer the protection of being able to revoke his acceptance of an unsatisfactory product. See Guerdon Indus., Inc. v. Gentry, 531 So. 2d 1202 (Miss. 1988) (seller does not have an unlimited right to repair because there comes a time where enough is enough); Thurston v. Green Tree Acceptance of Tex., Inc., 853 S.W.2d 806 (Tex. App. 1993) (seller cannot bar buyer's suit by making endless efforts to repair the goods); and Abele v. Bayliner Marine Corp., 11 F. Supp. 2d 955 (N.D. Ohio 1997) (buyer is not permitted to tinker with the article indefinitely in the hope that it may ultimately be made to comply with the warranty). Similarly, new car purchasers may rely on “lemon laws,” which provide them a remedy if the car has multiple, similar repairs that are not corrected shortly.

Tenants, historically, have not been offered the same protection as these other types of consumers. However, there are several common law remedies for commercial tenants who do not receive the benefits for which they bargained. For example, tenants are generally protected by the covenant of quiet enjoyment, the ability to offset rent when the landlord fails to make necessary repairs, and the doctrine of constructive eviction.

Although each state's law on constructive eviction differs slightly, generally, a constructive eviction is “an act which is done with the express or implied intention, and has the effect, of essentially interfering with the tenant's beneficial enjoyment of the leased premises.” Hankins v. Smith, 138 So. 494, 496 (Fla. 1931); Home Rentals Corp. v. Curtis, 602 N.E.2d 859 (Ill. App. Ct. 1992) (constructive eviction occurs when landlord has done something of a grave and permanent nature with the intention of depriving tenant of the enjoyment of the premises); W. Broadway Glass Co. v. I.T.M. Bar, Inc., 658 N.Y.S.2d 162 (1996) (constructive eviction occurs where landlord's wrongful acts substantially deprive tenant of the beneficial use and enjoyment of the premises), aff'd, 666 N.Y.S.2d 629 (N.Y. App. Div. 1997). Discomfort and inconvenience may justify a reduction in rent, but in the commercial context, generally will not be sufficient to support a finding of constructive eviction and justify termination of the lease. Boulevard Shoppes, A.B. v. Pro-1 Realty, Inc., 605 So.2d 1317 (Fla. 4th DCA 1992) (tenant was not constructively evicted when roof leaked and dogs deposited droppings at the front door when landlord acted reasonably to remedy the problems); P. H. Alston v. Georgia Credit Counsel, Inc., 140 Ga. App. 784 (1976) (evidence that air-conditioning was inoperable for 3 days in June and that landlord's janitorial service was unsatisfactory only showed that premises were uncomfortable, not “untenantable,” precluding tenant from asserting defense of constructive eviction).

Whether a landlord's actions amount to a constructive eviction is generally a question of fact. For example, failure to adequately repair a leaking roof is a recurring theme in the case law, in some instances a repeated roof leak constitutes a constructive eviction; in others, it does not. Compare Overstreet v. Rhodes, 94 Ga. App. 750 (1956) (Bakery owner suffered through years of roof leaks that ultimately resulted in the premises deteriorating to the extent that the tenant was forced to move out. The Court of Appeals affirmed the jury verdict declaring the premises unfit for the tenant's business) with In re Jacqueline Hartwig, 222 B.R. 839 (C.D.Ill. 1998) (roof leaking for over a year after landlord's attempted repairs not sufficiently serious to support constructive eviction claim, even though tenant may have lost some customers as a result of problems with leaking); K&S Enterprises v. Kennedy Office Supply Co., Inc., 135 N.C.App. 260 (1999) (landlord's failure to repair roof did not render premises untenantable and did not constitute constructive eviction as tenant remained in the premises after leaks began).

Tenant's Risk in Asserting Constructive Eviction

Because there is no clear-cut test for determining when a constructive eviction has occurred, tenants bear some risk in abandoning the premises and asserting a constructive eviction claim. If the tenant is unsuccessful, it risks being held responsible for rent for the remainder of the lease term without the benefit of the use of the premises. In addition, the tenant likely must locate replacement space; so, there is a risk that the tenant will pay rent “twice.”

As mentioned previously, some states have codified the common law remedies of offsetting rent and constructive eviction in commercial leases. For example, a Florida statute provides commercial tenants the right to offset rent and the defense of constructive eviction when the lease gives the landlord the duty to repair. Fla. Stat. ' 83.201. The statute requires the tenant to: 1) advise the landlord in writing of the need to repair; 2) give the landlord at least 20 days to conduct repairs; and 3) inform the landlord that the tenant will not pay rent until such repairs have been made. If the landlord fails to make the repairs in the allotted time, rendering the premises wholly untenantable , the tenant can terminate the lease, abandon the premises and keep the retained rent, while avoiding any further liability for unpaid rent. Thus in Florida, if a landlord has a duty to repair, a tenant may declare, “Enough is enough,” when the repairs are not completed within 20 days of notice.

Despite its allure, the Florida statute puts the tenant at risk of trying to predict whether a court is going to find the premises wholly untenantable or merely uncomfortable. If the tenant guesses wrong, the tenant could be liable for the unpaid rent and be dispossessed for breaching the lease agreement.

What Should a Tenant Do To Protect Itself?

To protect itself, a tenant obviously should comply with all applicable lease provisions, particularly those requiring notice to the landlord of the need for repairs. Failure to provide such notice may preclude a finding of constructive eviction and leave the tenant on the hook for any unpaid rent. Vanderhoff v. Casler, 458 N.Y.S.2d 289, 290 (N.Y. App. Div. 1983); Home Rentals Corp. v. Curtis, 602 N.E.2d 859 (Ill. App. Ct. 1992) (tenant may not abandon premises without providing lessor reasonable opportunity to cure). Tenants should habitually notify the landlord of any defect in writing, and follow-up regularly (every 20-30 days) to insure the repairs have been made. In addition, it is imperative that the tenant keep detailed records of all notices sent and of the landlord's response, if any.

Commercial tenants, as sophisticated parties, also have the option of being proactive and negotiating around the common law in their lease agreements. Tenants should consider contracting against a landlord's potential perpetual right to cure and specifically provide a limit on the number of times the landlord may cure the same (or similar) defect. A tenant may even choose to assume the duty to repair the premises itself, providing a contractual mechanism for charging the costs of the repairs back to the landlord. Such a provision enables the tenant to be the master of its premises, but it could result in tenant being forced to pay large repair bills out of pocket.

The Landlord's Dilemma

Although it may appear that landlords hold a legal advantage in that a landlord conceivably could make piecemeal repairs that address a problem temporarily, but do not provide a tenant with sound premises, the law in most states leaves the landlord with precarious choices as well. A tenant could conceivably use a minor, but recurring, premises defect as an excuse to void a lease altogether; this risk is particularly acute when the tenant perceives its rental rates are “above market.” Even if a court were to ultimately determine that the defect was not significant enough to constitute a constructive eviction, a landlord must be concerned about effects on cash flow, collections, locating a replacement tenant, and, perhaps, how it is perceived by other tenants.

What Should a Landlord Do to Protect Its Rights?

Landlords should consider the same factors that courts typically evaluate in finding constructive eviction and govern themselves accordingly. For example, courts often look to a landlord's repeated failure to make requested repairs as a justification for a finding of constructive eviction. In instances where a tenant repeatedly requests the same repairs, the landlord should investigate the problem thoroughly to determine if a more drastic remedy is required. Berwick Corp. v. Kleinginna Inv. Corp., 143 So. 2d 684 (Fla. 3d DCA 1962) (the court found the lessor's failure to repair the roof, which resulted in intermittent leaking for several months, rendered the premises unusable and constituted a constructive eviction, despite several attempted repairs by landlord). Although the capital expense may seem great, the long-term legal liabilities may outweigh the short-term savings. Regardless, a landlord should: 1) carefully document its repair efforts; 2) record complaints; 3) distinguish the complaints, if feasible, to preserve argument that there was no recurrence of the same problem; and 4) maintain copies of its own response to such complaints.

Landlords also should consider negotiating around the common law in their commercial lease agreements. For example, a landlord may choose to put the duty to make minor repairs on the tenant, at its own expense. In drafting such provisions, the landlord should make sure the lease carefully delineates which party is responsible for both performing and paying for repairs.

Other Considerations

Typically, a tenant must abandon the premises within a reasonable time of the premises becoming untenantable . This should provide some protection to landlords against marginal claims of constructive eviction. Generally, the burden is on the tenant to show it abandoned the premises within a reasonable time after the landlord's wrongful act. McNamara v. Wilmington Mall Realty Corp., 466 S.E.2d 324 (N.C. Ct. App. 1996)(finding a tenant who stayed in the premises for almost four years did not vacate the premises within a reasonable time following the landlord's wrongful act). The tenant often cannot or will not move quickly enough, undermining its own potential claim. Because the amount of time considered reasonable in abandoning the premises varies depending on the circumstances of each case, most of these issues raise fact questions for the jury. Id. at 328. So, the uncertainty persists.

Conclusion

Parties to commercial leases face the scope of the duty to repair on a regular basis. In order to avoid the uncertainty of the common law that exists in most states, prudent landlords and tenants should consider drafting cure provisions that more appropriately fit their anticipated needs. In negotiating such provisions, the parties should take into consideration the applicable statutes and case law in their jurisdiction.

Is the landlord's right to cure a defect in the premises a perpetual one? The answer depends on where you are, what your lease says, and whether you have documented complaints and repairs adequately.

Commercial lease agreements often contain provisions imposing a duty to keep the premises in repair. This duty is typically mitigated by an opportunity to cure any default by making the necessary repairs on the property after receiving notice of the problem. The right to cure presents challenges for both landlords and tenants. Occasionally, the party with the duty to repair may have an incentive to do as little as possible to correct the problem, comforted by the knowledge that written notice must be given before a default occurs. Both legal issues and more practical business concerns increase, however, when the same or similar problem arises repeatedly throughout the lease term even if “repairs” have been made. A recurring, though minor, repair issue may serve as an excuse for the non-defaulting party to terminate the lease prematurely. The landlord will choose this route when markets are strong and it can lease the space for a higher rent. Conversely, a tenant may resort to this tactic when markets are weak ' either to negotiate a better rate at the existing space or leave to find accommodations with more favorable terms.

Some states have enacted statutes to address these issues, essentially stating that there comes a time in which the non-defaulting party may say, “Enough is enough,” and terminate the lease altogether notwithstanding the opportunity to cure. The majority of states, however, have not enacted legislation to deal with these issues, resulting in parties, as well as courts and juries, having to guess whether a breach is severe enough to constitute a constructive eviction. This article will consider how landlords and tenants protect themselves from the uncertainty that exists in many states regarding whether the right to cure appears to be a perpetual one.

The Common Law Doctrine of Constructive Eviction

Generally, the landlord has the duty to repair the premises. When the landlord's failure to repair makes the premises unfit for the tenant to carry on its everyday business and the premises cannot be made tenable by ordinary repairs without causing unreasonable interruption to the tenant's business, the tenant may terminate the lease. The burden of proving that the premises are uninhabitable is a heavy one for the tenant, and begs many questions, such as, “What is everyday business?”; “What are ordinary repairs?”; and “What is an unreasonable interruption?” Historically, tenants have been somewhat disadvantaged by the law in this area because the common law treats the covenant to pay rent and the covenant to repair as independent covenants. Grant EL: Disturbing Concepts: Quiet Enjoyment and Constructive Eviction in the Modern Commercial Lease. 35 Real Property, Probate and Trust Journal 57 (Spring 2000); Lewis & Co. v. Chisolm , 68 Ga. 40 (1881) (covenant to repair and covenant to pay rent are independent covenants and therefore failure to repair does not work a forfeiture of rent). Therefore, under the common law, the tenant cannot simply withhold its rent if the landlord fails to keep the premises in good condition. The remedy for a landlord's failure to repair is either for the tenant to repair the premises itself and offset the cost of repair against its rent, or for the tenant to do nothing and then sue the landlord for damages caused by the failure to repair. It is only in the most egregious situations that the tenant is permitted to terminate the lease under the doctrine of constructive eviction without regard to the landlord's right to cure. W. Broadway Glass Co. v. I.T.M. Bar, Inc., 658 N.Y.S.2d 162 (N.Y.App. Term. 1996) (a constructive eviction exists where a landlord's acts substantially and materially deprive the tenant of the beneficial use of the premises) aff'd 666 N.Y.S.2d 629 (N.Y.App. Div. 1997); Roseville Props. Mgmt. Co. v. DiMed Corp., No. C8-93-2501, 1994 WL 396350 (Minn. App. Aug. 2 1994) (constructive eviction must be something of a grave and permanent character which deprives the tenant of the use, occupation and enjoyment of premises), (quoting Donaldson v. Mona Motor Oil Co., 193 Minn. 283, 286, (1935)).

Many states have enacted statutes to protect one party in a transaction from the other party's potential abuse of the right to cure defects in other areas of the law. For example, the Magnuson Moss Warranty ' Federal Trade Improvement Act governs express warranties on consumer products, and there are various applicable UCC provisions in each state. In the consumer product area, the law clearly gives the buyer the protection of being able to revoke his acceptance of an unsatisfactory product. See Guerdon Indus., Inc. v. Gentry, 531 So. 2d 1202 (Miss. 1988) (seller does not have an unlimited right to repair because there comes a time where enough is enough); Thurston v. Green Tree Acceptance of Tex., Inc., 853 S.W.2d 806 (Tex. App. 1993) (seller cannot bar buyer's suit by making endless efforts to repair the goods); and Abele v. Bayliner Marine Corp., 11 F. Supp. 2d 955 (N.D. Ohio 1997) (buyer is not permitted to tinker with the article indefinitely in the hope that it may ultimately be made to comply with the warranty). Similarly, new car purchasers may rely on “lemon laws,” which provide them a remedy if the car has multiple, similar repairs that are not corrected shortly.

Tenants, historically, have not been offered the same protection as these other types of consumers. However, there are several common law remedies for commercial tenants who do not receive the benefits for which they bargained. For example, tenants are generally protected by the covenant of quiet enjoyment, the ability to offset rent when the landlord fails to make necessary repairs, and the doctrine of constructive eviction.

Although each state's law on constructive eviction differs slightly, generally, a constructive eviction is “an act which is done with the express or implied intention, and has the effect, of essentially interfering with the tenant's beneficial enjoyment of the leased premises.” Hankins v. Smith, 138 So. 494, 496 (Fla. 1931); Home Rentals Corp. v. Curtis, 602 N.E.2d 859 (Ill. App. Ct. 1992) (constructive eviction occurs when landlord has done something of a grave and permanent nature with the intention of depriving tenant of the enjoyment of the premises); W. Broadway Glass Co. v. I.T.M. Bar, Inc., 658 N.Y.S.2d 162 (1996) (constructive eviction occurs where landlord's wrongful acts substantially deprive tenant of the beneficial use and enjoyment of the premises), aff'd, 666 N.Y.S.2d 629 (N.Y. App. Div. 1997). Discomfort and inconvenience may justify a reduction in rent, but in the commercial context, generally will not be sufficient to support a finding of constructive eviction and justify termination of the lease. Boulevard Shoppes, A.B. v. Pro-1 Realty, Inc., 605 So.2d 1317 (Fla. 4th DCA 1992) (tenant was not constructively evicted when roof leaked and dogs deposited droppings at the front door when landlord acted reasonably to remedy the problems); P. H. Alston v. Georgia Credit Counsel, Inc., 140 Ga. App. 784 (1976) (evidence that air-conditioning was inoperable for 3 days in June and that landlord's janitorial service was unsatisfactory only showed that premises were uncomfortable, not “untenantable,” precluding tenant from asserting defense of constructive eviction).

Whether a landlord's actions amount to a constructive eviction is generally a question of fact. For example, failure to adequately repair a leaking roof is a recurring theme in the case law, in some instances a repeated roof leak constitutes a constructive eviction; in others, it does not. Compare Overstreet v. Rhodes , 94 Ga. App. 750 (1956) (Bakery owner suffered through years of roof leaks that ultimately resulted in the premises deteriorating to the extent that the tenant was forced to move out. The Court of Appeals affirmed the jury verdict declaring the premises unfit for the tenant's business) with In re Jacqueline Hartwig, 222 B.R. 839 (C.D.Ill. 1998) (roof leaking for over a year after landlord's attempted repairs not sufficiently serious to support constructive eviction claim, even though tenant may have lost some customers as a result of problems with leaking); K&S Enterprises v. Kennedy Office Supply Co., Inc., 135 N.C.App. 260 (1999) (landlord's failure to repair roof did not render premises untenantable and did not constitute constructive eviction as tenant remained in the premises after leaks began).

Tenant's Risk in Asserting Constructive Eviction

Because there is no clear-cut test for determining when a constructive eviction has occurred, tenants bear some risk in abandoning the premises and asserting a constructive eviction claim. If the tenant is unsuccessful, it risks being held responsible for rent for the remainder of the lease term without the benefit of the use of the premises. In addition, the tenant likely must locate replacement space; so, there is a risk that the tenant will pay rent “twice.”

As mentioned previously, some states have codified the common law remedies of offsetting rent and constructive eviction in commercial leases. For example, a Florida statute provides commercial tenants the right to offset rent and the defense of constructive eviction when the lease gives the landlord the duty to repair. Fla. Stat. ' 83.201. The statute requires the tenant to: 1) advise the landlord in writing of the need to repair; 2) give the landlord at least 20 days to conduct repairs; and 3) inform the landlord that the tenant will not pay rent until such repairs have been made. If the landlord fails to make the repairs in the allotted time, rendering the premises wholly untenantable , the tenant can terminate the lease, abandon the premises and keep the retained rent, while avoiding any further liability for unpaid rent. Thus in Florida, if a landlord has a duty to repair, a tenant may declare, “Enough is enough,” when the repairs are not completed within 20 days of notice.

Despite its allure, the Florida statute puts the tenant at risk of trying to predict whether a court is going to find the premises wholly untenantable or merely uncomfortable. If the tenant guesses wrong, the tenant could be liable for the unpaid rent and be dispossessed for breaching the lease agreement.

What Should a Tenant Do To Protect Itself?

To protect itself, a tenant obviously should comply with all applicable lease provisions, particularly those requiring notice to the landlord of the need for repairs. Failure to provide such notice may preclude a finding of constructive eviction and leave the tenant on the hook for any unpaid rent. Vanderhoff v. Casler , 458 N.Y.S.2d 289, 290 (N.Y. App. Div. 1983); Home Rentals Corp. v. Curtis, 602 N.E.2d 859 (Ill. App. Ct. 1992) (tenant may not abandon premises without providing lessor reasonable opportunity to cure). Tenants should habitually notify the landlord of any defect in writing, and follow-up regularly (every 20-30 days) to insure the repairs have been made. In addition, it is imperative that the tenant keep detailed records of all notices sent and of the landlord's response, if any.

Commercial tenants, as sophisticated parties, also have the option of being proactive and negotiating around the common law in their lease agreements. Tenants should consider contracting against a landlord's potential perpetual right to cure and specifically provide a limit on the number of times the landlord may cure the same (or similar) defect. A tenant may even choose to assume the duty to repair the premises itself, providing a contractual mechanism for charging the costs of the repairs back to the landlord. Such a provision enables the tenant to be the master of its premises, but it could result in tenant being forced to pay large repair bills out of pocket.

The Landlord's Dilemma

Although it may appear that landlords hold a legal advantage in that a landlord conceivably could make piecemeal repairs that address a problem temporarily, but do not provide a tenant with sound premises, the law in most states leaves the landlord with precarious choices as well. A tenant could conceivably use a minor, but recurring, premises defect as an excuse to void a lease altogether; this risk is particularly acute when the tenant perceives its rental rates are “above market.” Even if a court were to ultimately determine that the defect was not significant enough to constitute a constructive eviction, a landlord must be concerned about effects on cash flow, collections, locating a replacement tenant, and, perhaps, how it is perceived by other tenants.

What Should a Landlord Do to Protect Its Rights?

Landlords should consider the same factors that courts typically evaluate in finding constructive eviction and govern themselves accordingly. For example, courts often look to a landlord's repeated failure to make requested repairs as a justification for a finding of constructive eviction. In instances where a tenant repeatedly requests the same repairs, the landlord should investigate the problem thoroughly to determine if a more drastic remedy is required. Berwick Corp. v. Kleinginna Inv. Corp., 143 So. 2d 684 (Fla. 3d DCA 1962) (the court found the lessor's failure to repair the roof, which resulted in intermittent leaking for several months, rendered the premises unusable and constituted a constructive eviction, despite several attempted repairs by landlord). Although the capital expense may seem great, the long-term legal liabilities may outweigh the short-term savings. Regardless, a landlord should: 1) carefully document its repair efforts; 2) record complaints; 3) distinguish the complaints, if feasible, to preserve argument that there was no recurrence of the same problem; and 4) maintain copies of its own response to such complaints.

Landlords also should consider negotiating around the common law in their commercial lease agreements. For example, a landlord may choose to put the duty to make minor repairs on the tenant, at its own expense. In drafting such provisions, the landlord should make sure the lease carefully delineates which party is responsible for both performing and paying for repairs.

Other Considerations

Typically, a tenant must abandon the premises within a reasonable time of the premises becoming untenantable . This should provide some protection to landlords against marginal claims of constructive eviction. Generally, the burden is on the tenant to show it abandoned the premises within a reasonable time after the landlord's wrongful act. McNamara v. Wilmington Mall Realty Corp., 466 S.E.2d 324 (N.C. Ct. App. 1996)(finding a tenant who stayed in the premises for almost four years did not vacate the premises within a reasonable time following the landlord's wrongful act). The tenant often cannot or will not move quickly enough, undermining its own potential claim. Because the amount of time considered reasonable in abandoning the premises varies depending on the circumstances of each case, most of these issues raise fact questions for the jury. Id. at 328. So, the uncertainty persists.

Conclusion

Parties to commercial leases face the scope of the duty to repair on a regular basis. In order to avoid the uncertainty of the common law that exists in most states, prudent landlords and tenants should consider drafting cure provisions that more appropriately fit their anticipated needs. In negotiating such provisions, the parties should take into consideration the applicable statutes and case law in their jurisdiction.