Constructive Eviction of a Commercial Tenant

Katz Deli v. Waterways Plaza, 3D12-3409 & 3D13-124 (Fla. 3d DCA 2013):

This appeal and cross-appeal contested the amount of damages awarded for a breach of contract that led to the constructive eviction and ultimate destruction of Katz Deli. Katz Deli expanded by leasing a space in the Waterways Plaza of Aventura. The lease required monthly rental payments of $25,000, contained lease renewals that could potentially extend until 2022, and required the landlord to make all necessary repairs to the structure and roof. The lease was negotiated before Waterways Plaza purchased the property. Hiring an experienced South Florida commercial real estate attorney for lease negotiations can help avoid disputes arising from complicated commercial leases.

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H. Allen Homes, Inc. and Henry Allen Holmes v. Jim Molter, Inc., 4D13-217 (Fla. 4th DCA 2013):

This appeal arose from a landlord-tenant dispute involving commercial real estate. The tenant removed its trade fixtures when it vacated the leased premises after the parties’ lease contract expired. For this reason, the landlord retained the security deposit. The tenant filed a breach of contract claim against the landlord of the commercial real estate for the alleged improper retention of the security deposit. The landlord filed claims for breach of contract, conversion, and civil theft against the tenant and the tenant’s president for the alleged improper removal of the trade fixtures.

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AGBL Enterprises, LLC v. Girlcook, Inc., 96 So.3d 1058 (Fla. 4th DCA 2012):

AGBL Enterprises (“Lessor”) leased a commercial building in a shopping plaza to be used as a full service restaurant to Girlcook (“Lessee”). The lease contained an integration clause that stated, “[T]he entire agreement between the Lessor and Lessee consists solely of the terms in this lease and the accompanying rider. The agreement between the lessor and lessee will not consist of any verbal or implied statements which are not specifically written in this lease or the accompanying rider.” Despite the shopping plaza undergoing major renovations at the time the lease was signed, no provision in the lease required the renovations to be completed by any specific date. Moreover, Lessee agreed to accept the premises, which included the building being leased and the entirety of the plaza, in the current condition at the beginning of the rental period. The lease also required Lessee to make monthly rent payments before the first day of each month. Lessor was responsible for maintaining the roof, foundation and exterior of the building, and all parking areas in decent repair for their intended use.

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Lougas v. Sophia Enterprises, Inc., 4D12-2355 (Fla. 4th DCA 2013):

The Appellant contested the court’s final judgment in favor of the Landlord. The Appellant asserted that the Landlord terminated the Lease and any legal obligations by sending a notice of termination.

The Appellant had entered into a five-year commercial lease with the Landlord. The Lease provided that in the event the Appellant assigned his rights under the Lease, the Appellant would still be responsible for any unpaid rents by his assignee. Additionally, the Landlord could unilaterally terminate the Lease in the event of a sale of the leasehold property after providing sixty days written notice to the tenant.

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The South Florida Business Journal reported that over 3.6 million square feet of leases in South Florida commercial properties are set to expire over the next 12 months. Included in the 3.6 million square feet is 1.91 million for retail, 1.15 million for office, and 484,225 for industrial. South Florida is home to approximately 40% of Florida’s expiring leases. The lease expirations could cause trouble for properties that are unable to obtain new leases on terms that are as favorable as deals in place now.

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When signing a commercial lease, it is essential to understand and agree to all of the provisions. Provisions are usually designed to favor the landlord; however, a landlord may be willing to negotiate. Experienced luxury real estate attorneys should be consulted before entering a commercial lease. Here are a few essential provisions that should be clearly understood prior to signing:

Term – A short-term lease provides a tenant with more flexibility for changing needs. A tenant may decide to change locations or move to a space with more or less square footage. If a tenant is confident in the location they are choosing, it may be advantageous to negotiate a long-term lease. With a long-term lease, a tenant does not have to worry about the landlord renewing the lease and may receive a better rent payment or other concessions. An additional option is to negotiate a short-term lease with an option to extend or renew. While an extension gives the existing lease a new end date, a renewal results in both a new beginning and end date.

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When signing a commercial lease, it is essential to understand and agree to all of the provisions. The provisions in a commercial lease are usually designed to favor the landlord; however, a landlord may be willing to negotiate. An experienced real estate attorney should be consulted before entering a commercial lease. Here are a few essential terms that should be clearly understood prior to signing:

Term – A short-term lease provides a tenant with more flexibility for changing needs. The tenant may decide on a change of location or a space with more or less square footage. If a tenant is confident in the location they are choosing, it may be advantageous to negotiate a long-term lease. With a long-term lease, the tenant does not have to worry about the landlord renewing the lease and may receive a better rent payment or other concessions. An additional option is to negotiate a short-term lease with an option to extend or renew when the tenant is unsure whether the location will be a good fit. While an extension gives the existing lease a new end date, a renewal results in both a new beginning and end date.

Rent – Negotiating the rent in a commercial lease largely depends on the market. If the market is strong, a landlord is unlikely to reduce rent payments. Additionally, landlords may try to include annual increases to rent in the lease terms. A tenant should negotiate any proposed annual rent increases. The tenant may want to insist on the elimination of such a clause, get a cap on annual rent increases, or exclude rent increases in certain years. Another consideration is a gross lease vs. a net lease. A gross lease includes the costs of utilities, repairs, taxes, and insurance. A net lease does not include these costs and a tenant may prefer to negotiate a higher rent to eliminate responsibility for these potentially large costs.

Quiet Enjoyment – In the absence of an express agreement to the contrary, the landlord impliedly covenants to protect the tenant from removal by anyone having an interest in the premises that is superior to the interest of the landlord. A tenant should consider including a covenant of quiet enjoyment and removing any contrary express agreement before signing a lease. Violation of the express covenant of quiet enjoyment has been found to constitute constructive eviction, permitting the tenant to vacate the premises without liability.

Repair and Maintenance – In the absence of an express agreement to the contrary, the landlord has no obligation for repairs. The tenant must maintain the premises in the same condition as when the lease started. If not negotiated otherwise, the tenant may be required to repair the roof, windows, and doors to prevent intrusion of the elements. A tenant should include an express provision that the landlord is responsible for repairs. If a tenant follows notice procedures when a landlord fails to make repairs, a tenant may withhold rental payments and eventually may terminate the lease under Fla. Stat. 83.201.

Condition of Premises – In an absence of an express agreement to the contrary, the landlord has no liability for the condition of the premises. There is no implied warranty of habitability or fitness for use. A commercial tenant should be cautious when inspecting the premises. The tenant should ensure that the property is in useable condition for the intended purpose. An express provision should be drafted if the tenant wants the landlord to fix a condition of the premises.