Commercial Lease Repair Terms
The bomb cyclone that recently blanketed the entire east coast may no longer be a threat, but it is still January in Pittsburgh, and cold weather is eminent. This month’s blog discusses commercial leases and what options are available for tenants should the cold weather (or simply Mother Nature) cause water main breaks, frozen pipes or the like, leading to damage of the premises.
In Pennsylvania, commercial leases and residential leases are distinguishable; commercial tenants are afforded less protection than residential tenants, and certain principles that help out residential tenants are not applicable to your business lease. The most notable is the implied warranty of habitability, which was adopted by Pennsylvania in 1979 in the Pennsylvania Supreme Court case Pugh v. Holmes.
Under this implied warranty, landlords must ensure the residential premises is habitable. This warranty includes that the landlord must ensure that the tenant has heat, hot water, electricity, etc. and makes any repairs to such utilities affecting habitability within a reasonable time after being given notice by the tenant. Courts will seek to protect tenants in cases where the landlord clearly fails to meet these requirements.
In addition to the implied warranty of habitability, there is the implied covenant of quiet enjoyment. The implied covenant of quiet enjoyment applies both to residential and commercial tenants. The implied covenant of quiet enjoyment means that so long as the tenant pays their rent and abides by the lease, they have full enjoyment and possession of the property. If the landlord’s wrongful act interferes with the tenant’s possession, the court may find a breach of quiet enjoyment.
For a court to find breach of quiet enjoyment in a commercial case, the case is typically egregious, including extreme negligence by the landlord, consistent requests for repairs affecting the ability of the tenant to use the premises without response, structural changes made by the landlord that severely impedes access to or use of the premises, and so forth. Because quiet enjoyment claims are challenging from a tenant’s perspective, there are other ways in which a tenant can ensure protection should damage arise.
Protections afforded to tenants come from the written lease itself, which may present an issue if the tenant has minimal bargaining power prior to signing the commercial lease. However, there are a few sections or clauses that are rather standard that tenants can keep an eye out for. We also (obviously) recommend hiring an attorney to review your lease prior to signing to catch clauses that may limit your rights or negotiate for better protections. Here are a few sections we recommend looking out for:
Landlord responsibility to repair - The landlord’s responsibilities should be clearly delineated to ensure there is no ambiguity regarding who is responsible for repairs and replacements. Common landlord responsibilities include structural repairs to the roof, foundation, walls, and utility lines. You also want to have that the landlord is responsible for replacing things like the furnace, water heater, etc. Common tenant responsibilities include interior maintenance repairs that are not structural in nature. Sometimes tenants are responsible for repairs of major appliances like the furance or electrical, but tenants should always make sure the landlord is responsible for replacement. PRO TIP! Pennsylvania case law says that unless a lease specifically says the tenant is responsible for replacement, it is the duty of the landlord.
Early termination - Commercial leases tend to be long-term in nature, so it is important tosee if you can negotiate an early termination option in case the tenant is unable to obtain the necessary permits for their business, repairs aren’t being made that are affecting the ability to use the premises, and/or to relocate or cease operation.
Force majeure - Catastrophic events that are unforeseeable and outside of the landlord’s control typically fall into this category. Leases often have fire or other casualties clauses that address damages and responsibilities of the tenant and landlord. Fire, flooding, and other casualty sections are particularly relevant to this blog post given unexpected events such as pipes freezing and bursting, which frequently occur during winter months. Force majeure and quiet enjoyment often conflict because the former may lead to a breach of the latter. However, many jurisdictions, including Pennsylvania, are constrained by the written lease when determining responsibility and remedies. For example, unless the landlord’s continued failure to maintain water pipes and/or ignore requests for repairs and subsequent frigid temperatures lead to frozen pipes and water damage, it will be difficult to find the landlord responsible and abandon your lease, even if you have to go weeks without being able to use your property. Therefore, a tenant wants to look for language in their lease that includes reasonable or expedited response and repair or replacement times by the landlord that include a time cap that allows the tenant to leave the lease if it is exceeded (for example if the repairs cannot be made within 30 days the tenant can terminate the lease). Tenants should advocate that their lease allows them to receive a rent abatement based on the percent of unusable property while repairs are being made.
Unfortunately, commercial leases and case law addressing commercial leases in Pennsylvania are generally not tenant friendly, so to maximize tenant protection (and minimize headaches in the event of damage!), the above sections can be important to review in regards to repairs and damage before signing a lease.
Again, these are just a few of the important sections of a lease so we recommend having an attorney review your entire lease prior to signing, or if you are already under a lease, prior to taking any action to terminate the lease, abandon the property, or withhold rent to make sure your lease affords you the right to do so.
We hope this month’s post is informative for you commercial tenants out there, and we wish you a happy, healthy, and hopefully problem-free New Year!