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Evaluating Commercial Leases Post-'Rohrmoos'
In 2019, contravening well-settled Texas law, the Texas Supreme Court held that a commercial tenant may terminate a lease based on a landlord's prior material breach of the lease. Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469 (Tex. 2019). Specifically, Rohrmoos held that a commercial landlord's material breach — at least one that might also qualify as a breach of the implied warranty of suitability — justifies a tenant's recission of the lease. (The record is not wholly clear, but it appears the material breach was moisture penetration at the tenant's dialysis clinic resulting in state health inspectors' "critici[sm]" of the facility. 578 S.W.3d at 475-76. The tenant in this case had built the stand alone clinic.) 578 S.W.3d at 482-83. The Rohrmoos decision effected a seismic shift in Texas landlord-tenant law that this article briefly explores. This article focuses on Rohrmoos' — apparent — collapsing of the distinction between the implied warranty of suitability in a commercial lease and a material breach of lease and offers insight into what both transactional and litigation lawyers should consider in evaluating commercial leases post-Rohrmoos.
Prior to Rohrmoos the Texas Supreme Court first held in Kamarath v. Bennett, 568 S.W.2d 658, 660-61 (Tex. 1988), that a residential tenant may withhold rent if the landlord breaches the implied warranty of habitability. The court did not address recission as a remedy, and it noted there was no evidence that the tenant waived the implied warranty of habitability in the oral lease. Later, in Davidow v. Inwood N. Pro. Grp., 747 S.W.2d 373, 376-77 (Tex. 1988), the court extended Kamarath to commercial leases, finding an implied warranty of suitability exists in commercial leases except where the parties "expressly agree that the tenant will repair certain defects[] …." The court also noted the longstanding rule in Texas that "landlord's covenant to repair the premises and the tenant's covenant to pay rent are independent covenants." Id. at 375.
Accordingly, while Davidow recognized an implied warranty of suitability in commercial leases, it did not undo the independent covenant doctrine. If the court had intended to do so, it would not have held the implied warranty could be expressly waived, since a material breach by the landlord would always justify recission without the independent covenant doctrine, whether or not the implied warranty was breached.
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