No Lawsuit for Failure of Tenant to Maintain and Repair until Lease is Terminated
In today’s real estate market with few new tenants available to fill any vacant rental space, a landlord challenged by a tenant who refuses to maintain the leased premises in accordance with the standard required by the contract, may be reluctant to terminate the tenant’s lease. However, in the recent case of Avalon Pacific – Santa Ana, L.P. v HD Supply Repair and Remodel, LLC, the California Court of Appeal re-affirmed the common law rule that the landlord cannot sue the tenant for damages for breach of the lease agreement to maintain the leased premises until the lease expires or is terminated. That makes sense, because until the lease expires or is terminated, the tenant still has the right and opportunity to fix anything requiring maintenance or repairs.
If such a judgment were awarded, the landlord would still not have the right to enter the premises to make the repairs, because the tenant is entitled to exclusive possession until the lease expires or is terminated. There also is the possibility and likelihood of a double recovery, since the tenant would still be obligated to return the leased premises at the end of the term in the condition required by the lease, and the tenant might even do so. The court’s stated solution is that the landlord should have sued for specific performance of the maintenance and repair provision.
This decision ignores the economic reality of the mutual dependence of retailers in shopping centers on each other and the external and internal appearance of each other’s stores to generate traffic and to drive buyers to each other’s stores. If one tenant, especially a large tenant, such as anchor tenant like Home Depot, is closed or appears closed, with lights out, no merchandise or signs in the windows, and windows boarded or painted over, the appearance of that store not only is not going to attract customers to the other stores in the center, it’s going to repel them.
If you have a tenant who is trashing the leased premises and you are reluctant to terminate him out of fear of finding any replacement, consider suing for specific performance. It should avoid a hole in your center. The lawsuit to enforce the lease will have the deterrent effect on other tenants that you want. It does not let the rogue tenant off the hook for his responsibilities under the lease. And the court can enforce it with contempt of court citations that can include $1000.00 per day fines and ordering the personal appearance in court of senior executives, including the CEO and Chairman.
Finally, to add injury to the insult, in the Avalon Pacific case, the tenant is going to be entitled to recover its attorneys fees as the prevailing party. Not only was the award of damages and treble damages for waste reversed, but the landlord will have to pay both its own attorneys fees and expenses and also the tenants’.
If you have a tenant who is saving money by not keeping up the leased premises, but you’re afraid to evict him, because the space might remain vacant for months, please call me to discuss the efficacy of a lawsuit for specific performance of the maintenance and repair obligations under the lease. It sends the right message to the tenant. “I’m not asking for money from you. I’m just asking you to take care of the building I have turned over to you, as you promised.”
I hope you don’t have this problem, but if it arises, I look forward to helping you resolve it.