Assess critically the remedies available to landlords for breach of covenant by their tenants. What factors may influence a landlord when deciding which remedy to pursue?

. INTRODUCTION

  1. Landlord Remedies and Tenant Remedies.

As all real estate practitioners know, most leases are replete with provisions about the remedies available to a landlord upon a breach by the tenant. Many treatises have been written on the subject of tenant default and landlord remedies. However, such is not the case with respect to tenant remedies. Believe it or not, tenants do have some remedies on landlord default.

 This paper is an update of a presentation given in September 2001 at the 10th Annual Conference for Attorneys and Real Estate Professionals – Negotiating Commercial Leases. In writing this paper originally, I relied heavily on Robert Callaway’s paper on this subject entitled “Tenant Remedies When the Landlord Defaults or in Other Actionable Circumstances” (hereinafter, “Callaway” and “Callaway’s Paper”) given in March of 1999 at the SMU School of Law Seminar – Real Estate Law: Leases

in Depth. Mr. Callaway’s Paper is still cited extensively in this paper. Also, I wish to

thank Theresa Nassif, who performed the work necessary to update the research on this

B.   Scope of Presentation.

 This presentation is limited to remedies available to a tenant upon breach of a commercial lease by a landlord. This presentation will not discuss defenses available to the tenant, except to the extent applicable to a breach by the landlord. Therefore, the landlord’s obligation to mitigate damages will not be discussed. Further, hardly any mention will be made of the law relating to residential tenancies.

II.      PREREQUISITE TO TENANT REMEDIES – LANDLORD DEFAULT

 There are a few basic similarities between landlord’s remedies and tenant’s remedies. For example, a landlord who desires to enforce a landlord remedy must first prove a tenant default. Likewise, before exercising any tenant remedies, the tenant must first establish that the landlord has done something it shouldn’t have done or failed to do something it should have done. Before discussing any remedies available to the tenant for landlord default, I will first identify those actions or inactions which could lead to

redress by the tenant. I have attempted to categorize below the types of landlord default into three categories:

A. Breach of Contract,

B.   Breach of Statutory Obligation, and

C.    Other.

A.    Breach of Contract.

              A landlord may expose itself to remedies of a tenant in several different ways. The first of those ways is the violation of an obligation placed upon the landlord under common law, which may include the breach of express covenants in a lease or implied covenants under the law.

 Texas case law supports the ability of the tenant to complain of the landlord’s failure to comply with these express provisions. See e.g. in the case of the covenant of quiet enjoyment, Fidelity Mut. Life Ins. Co. v. Kaminsky, 768 S.W.2d 818 (Tex. App.— Houston [14th Dist.] 1989); in the case of furnishing services, Graham Hotel Co. v. Garrett, 33 S.W.2d 522 (Tex. Civ. App.—El Paso 1930); in the case of not unreasonably

withholding consent, Mitchell’s Inc. v. Nelms, 454 S.W.2d 809 (Tex. Civ. App.—Dallas 1970, writ ref’d n.r.e.); in the case of exclusive use, City Products Corporation v. Berman, 610 S.W.2d 446 (Tex. 1980); and, in the case of failure to repair, McCreless Properties, Ltd. v. F.W. Woolworth Company, 533 S.W.2d 863 (Tex. Civ. App.—San Antonio 1976, writ ref’d n.r.e.).

 Express Covenants.

1.Of course, most landlords try to avoid any express obligations under a lease, but   normally, landlords will agree to do some or all of the following, to name a few  examples:

(a) provide tenant undisturbed possession of the premises so long as the tenant complies with its obligations under the lease (covenant of quiet enjoyment);

(b) furnish services to the premises, such as utilities, HVAC, janitorial and security;

(c)  not unreasonably withhold consent to a sublease or assignment;

(d)  not lease other property of the landlord to someone in competition with the tenant; and

(e)  repair certain portions of the premises within landlord’s control.

2) Implied Covenants.

 Even though a lease contract between a landlord and a tenant may not by its terms expressly require the landlord to do anything, in at least two situations, the courts have implied landlord obligations stemming from the landlord-tenant relationship. Those two implied obligations are the implied covenant of quiet enjoyment and the implied warranty of suitability.

 (a)  Implied Covenant of Quiet Enjoyment. The first implied obligation has been recognized for quite some time. In the case of L-M-S Inc. v. Blackwell, 233 S.W.2d 286 (Tex. 1950), the Texas Supreme Court stated: “It is now generally accepted that every lease of land, in the absence of express  language to the contrary, raises an implied covenant that the lessee shall have the quiet and peaceful enjoyment of the leased premises.” Id. at 289; see also Four

(i) An intention on the part of the landlord that the tenant shall no longer enjoy the premises, which intention may be inferred by the circumstances proven;

(ii) A material act by the landlord or those acting for him or with his permission that substantially interferes with the use and enjoyment of the premises for the purpose for which they are let;

(iii) The act must permanently deprive the tenant of the use and

enjoyment of the premises; and

(iv)The tenant must abandon the premises within a reasonable time after the commission of the act.”

 Bros. Boat Works, Inc. v. Tesoro Petroleum Companies, Inc., 217 S.W.3d 653,665-66 (Tex. App.—Houston [14th Dist.] 2006, pet. denied).

 What is the covenant of quiet enjoyment? Or more importantly, whatconstitutes a breach of the covenant of quiet enjoyment? “For there to be a breach of this covenant, there must be an eviction, actual or constructive, brought about by the acts of the landlord or those acting for him or with his permission.”

Richker v. Georgandis, 323 S.W.2d 90, 95 (Tex. Civ. App.—Houston 1959, writ ref’d n.r.e.); see also Ghanbari v. Tran, 2007 Tex. App. LEXIS 2788 (Tex. App.—Beaumont Apr. 12, 2007); South Loop v. Health Home Care, 201 S.W.3d 349, 358, fn. 7 (Tex. App.—Houston [14th Dist.] 2006, no pet.). It has been held

that the elements that establish a breach of quiet enjoyment are the same that establish constructive eviction. Goldman v. Alkek, 850 S.W.2d 568, 571-72 (Tex. App.—Corpus Christi 1993, no writ). As pointed out by Callaway in his discussion on this subject, “The tenant must establish the landlord’s breach of the

covenant of quiet enjoyment by satisfying the four elements of “constructive eviction” as specifically set forth in Stillman v. Youmans, 266 S.W.2d 913, 916

(Tex. Civ. App.—Galveston 1954, no writ) as follows (hereinafter, the “Stillman test”):

While each of the elements stated above may have their own proof problems, it seems that the courts have been particularly ambiguous about the requirement of abandonment. As stated above, Texas courts usually require proof of abandonment to establish a breach of the covenant of quiet enjoyment. The theory behind this requirement is that the abandonment demonstrates a casual connection between the landlord’s acts and the tenant’s loss. However, in Goldman v. Alkek, a case involving the breach of an express covenant of quiet

enjoyment, the Corpus Christi Court of Appeals said that such cases do not necessarily control. Alkek, 850 S.W.2d. at 572.

 In Alkek, a 30-year lease provided that the tenant would develop the property as a “retail shopping center and office park.” After the shopping center demonstrated success, the landlord demanded the tenant perform obligations not required under the lease: maintaining a pre-existing building not specified in the lease and paying a percentage of gross revenues from stores other than the convenience store that was specified in the lease. Goldman also attempted to terminate the lease. Alkek did not abandon the property and counter-sued for

damages, a declaration of the amount of rent due under the contract, and a determination that he was not in default. The court held that Goldman had breached the covenant of quiet enjoyment by subjecting Alkek to obligations not required under the lease and by subjecting Alkek to overreaching and malicious prosecution. Id. at 574.

 The Alkek court further held that the tenant was “not required to prove the traditional elements of a breach of the warranty of quiet enjoyment” (including proof of abandonment) because sufficient legal and factual evidence existed to “show that the Goldmans breached the express warranty of this lease by hindering Alkek in his occupation and enjoyment of the property.” Id. Alkek demonstrates that the breach can occur without the tenant abandoning the premises.

Further, what constitutes a reasonable time to abandon is the subject of some dispute. From purely a timing standpoint with respect to a breach of the covenant of quiet enjoyment (and not necessarily constructive eviction), it appears that 17 months is too long, Metroplex Glass, 646 S.W.2d at 265-266, while 11 months is deemed to be a reasonable time within which to abandon, Downtown Realty, 748 S.W.2d at 311. The requirement of abandonment is discussed more fully in Section II. C. 2) (b) below relative to constructive eviction cases.

(b)  Implied Warranty of Suitability. The implied warranty of suitability is a common-law warranty that was first recognized in the commercial leasing context in the well-known case of Davidow v. Inwood North Professional Group – Phase I, 747 S.W.2d 373 (Tex. 1988), wherein the Texas Supreme Court extended its holding in Kamarath v. Bennett, 568 S.W.2d 658 (Tex. 1978), a case finding an implied warranty of habitability in residential leases.

 In Kamarath, the court tried to create a more contemporary solution to an old landlord-tenant problem. It recognized that in a residential lease, providing the tenant with a habitable dwelling was of primary importance, rather than merely creating a right of possession. Id. at 660. This case has since been superseded by a legislative enactment that created a limited landlord duty to repair and abrogated the implied warranty.

 See Act of May 28, 1979, 66th Leg., R.S., Ch. 780, §§1-18, 1979 Tex. Gen. Laws 1978 (Tex. Rev. Civ. Stat. Ann. art. 5236f, since repealed and codified at Tex. Prop. Code Ann. §§92.001-.061).Davidow extended Kamarath to commercial leases. The court in Davidow reviewed the case law and literature and concluded that there was no reason to

apply the implied warranty to residential leases as recognized in Kamarath and not to do so in commercial leases. Davidow, 747 S.W.2d at 376-77. The court held:

 “[T]here is an implied warranty of suitability by the landlord in a commercial lease that the premises are suitable for their intended commercial purpose. This warranty means that at the inception of the lease there are no latent defects in the facilities that are vital to the use of the premises for their intended commercial purpose and that these essential facilities will remain in a suitable condition. If, however, the parties to a lease expressly agree that the tenant will repair certain defects, then the provisions of the lease will control.”

Id. at 377.

 So how does one determine whether a breach of an implied warranty exists? The court in Davidow went on to describe the test as follows:

 “The existence of a breach of the implied warranty of suitability in commercial leases is usually a fact question to be determined from the particular circumstances of each case. Among the factors to be

considered when determining whether there has been a breach of this warranty are:

• the nature of the defect;

• its effect on the tenant’s use of the premises;

• the length of time the defect persisted;

• the age of the structure;

• the amount of the rent;

• the area in which the premises are located;

• whether the tenant waived the defect; and

• whether the defect resulted from any unusual or abnormal

use by the tenant.”

With so many factors to be considered, the facts of each case are very important. Often, the facts must show some egregious conduct by the landlord for the jury or court to find for the tenant, such as in Davidow. However, not all cases of poor treatment or neglect by the landlord lead a jury or court to find that this warranty has been breached. In Coleman v. Rotana, a restaurant complained that other tenants in the strip center were operating their businesses in a manner not permitted by their leases. 778 S.W.2d 867, 869 (Tex. App. – Dallas 1989, writ denied). As a result of this violation of their leases, the restaurant was experiencing parking problems. Despite the negative effect on the tenant, the court found that inadequate parking caused by co-tenants’ use of their premises in a manner not permitted by their leases, and the landlord’s inaction in enforcing the lease restrictions, did not give rise to the type of defect encompassed by the implied warranty of suitability. Id. at 871. The court held that the types of defects that are covered by the implied warranty of suitability are only “latent defects in the nature of physical or structural defect which the landlord has the duty to repair.”

 Davidow, 747 S.W.2d at 377; see also 7979 Airport Garage, L.L.C. v. Dollar Rent A Car Sys., No. 14-05-00484-CV (Tex. App.—Houston [14th Dist.] 2007, n.p.h.).

 Id; see also McGraw v. Brown Realty Co., 195 S.W.3d 271, 276 (Tex. App.—Dallas 2006, no pet.).

The court in Coleman went on to read Davidow as saying that in order to find a breach of the implied warranty, “the ‘facility’ alleged to be defective must also be within the leased premises.” Id. In Coleman, under the terms of the lease, the parking lot was part of the “common area” to which the restaurant had non- exclusive use and not the “demised premises.” Id. Also, citing Exxon Corp. v. Atlantic Richfield, Co., 678 S.W.2d 944, 947 (Tex. 1984), the Coleman court said there can be no implied warranty as to matters the lease specifically covers. Id.

 The Texas Supreme Court recently revisited the issue of the implied warranty of suitability in Gym-N-I Playgrounds v. Snider, 220 S.W.3d 905 (Tex. 2007), this time addressing the waiver of the warranty and holding that the implied warranty of suitability can be expressly waived by a tenant in a lease.

In Gym-N-I Playgrounds, the tenant brought suit against the landlord for damages after the building was destroyed by fire. The tenant alleged that the fire was caused by defective electrical wiring and the lack of a sprinkler system in the building, and filed causes of action for negligence, violation of the DTPA, breach of the implied warranty of suitability and fraud.. Id. at 907 n. 5. In his defense, the landlord asserted that such claims by the tenant were barred by the “as is” clause and warranty disclaimers in the lease. Specifically, the lease between the parties stated:

 “Tenant accepts the Premises “as is.” LANDLORD HAS NOT ANDDOES NOT MAKE ANY REPRESENTATIONS AS TO THE COMMERCIALSUITABILITY, PHYSICAL CONDITION, LAYOUT, FOOTAGE, EXPENSES,

 OPERATION OR ANY OTHER MATTER AFFECTING OR RELATING TO THE PREMISES AND THIS AGREEMENT, EXCEPT AS HEREIN SPECIFICALLY SET FORTH OR REFERRED TO AND TENANT DOES HEREBY EXPRESSLY ACKNOWLEDGE THAT NO SUCH REPRESENTATIONS HAVE BEEN MADE. LANDLORD MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, OR MERCHANTABILITY, MARKETABILITY, FITNESS OR SUITABILITY FOR A PARTICULAR PURPOSE OR OTHERWISE, EXCEPT AS EXPRESSLY SET FORTH HEREIN. ANY IMPLIED WARRANTIES ARE EXPRESSLY DISCLAIMED AND EXCLUDED….THE REPRESENTATIONS,

WARRANTIES, COVENANTS, TERMS, CONDITIONS, AND WAIVERS SET FORTH IN THIS SECTION SHALL SURVIVE THE TERMINATION OF THE LEASE.” Id. at 906-07 n. 1.

The tenant argued that the court’s opinion in Davidow authorized a waiver of the implied warranty of suitability only when the lease makes the tenant responsible for certain specifically enumerated defects, and consequently a

general “as is” provision could not waive the warranty. Id. at 909. The court did not agree with such a narrow interpretation; rather, the court recognized that an “as is” provision can waive claims based on a condition of the property. Id. At 912. This proposition, along with strong public policy in favor of the parties’ freedom of contract, supported the court’s conclusion that the implied warranty of suitability is waived when the lease expressly disclaims that warranty, as it did in this case. Id.

 Breach of Statutory Obligation.

 Aside from common law authority for alleging a breach by the landlord, at least three different statutes can be used by a tenant to claim wrongful conduct by the landlord.

 1) Sections 91.004 and 93.002 of Texas Property Code.

 The Texas Property Code contains a wealth of information regarding the rights and obligations between landlords and tenants. Unfortunately, of the 35 pages of text contained in Title 8, entitled “Landlord and Tenant,” roughly 32 of those pages deal with residential tenancies. However, the Property Code does provide some help to a commercial tenant who has been wronged. Section 91.004 of the Texas Property Code, entitled “Landlord’s Breach of Lease; Lien” grants remedies to a tenant (such remedies to be discussed later in this paper), if a landlord fails to comply with its lease agreement.

 Further, Section 93.002 (which has been reprinted in its entirely in Schedule 1 attached to this paper) prohibits the following:

Sections 91.004 and 93.002 of Texas Property Code.

 • interruption of utilities (§ 93.002(a));

 • removal of security mechanisms, such as door hinges, locks or

doorknobs (§ 93.002(b));

• removal of furniture, fixtures or appliances furnished by the landlord unless for bona fide repairs or replacement (§ 93.002(b));

 • exclusion of the tenant from the premises except for:

– bona fide repairs;

– removing contents of abandoned premises; or

– nonpayment of rent (§ 93.002(c));

 • failing to give proper notices when: disposing property (§ 93.002(e)) or changing door locks (§ 93.002(f)).

 However, a lease supersedes Section 93.002 to the extent of any conflict between the lease and that section (§ 93.002(h)).

2) A provision of the Texas Business and Commerce Code.

which has always given practitioners pause in connection with real estate sale transactions is apparently also applicable to lease transactions. Section 27.01 of the Texas Business and Commerce Code (attached as Schedule 2), sometimes called the “Real Estate Fraud Statute,” prohibits the following:

(a) A false representation of a past or existing material fact, when the false representation is

Section 27.01, Texas Business and Commerce Code.

(i) made to a person for the purpose of inducing that person to enter into a contract; and

(ii) relied on by that person in entering into that contract; or

(b) A false promise to do an act, when the false promise is

(i) material;

(ii) made with the intention of not fulfilling it;

(iii) made to a person for the purpose of inducing that person to

enter into a contract; and

(iv) relied on by that person in entering into that contract.

   The elements of statutory fraud under Section 27.01 are essentially identical to the elements of common law fraud (which are later discussed in this paper), except that this Section does not require proof of knowledge or recklessness as a prerequisite to the recovery of actual damages. Trinity Indus. v. Ashland, Inc., 53 S.W.3d 852, 867 (Tex. App.—Austin, 2001, pet. denied).

Other Possible Defaults.

 Aside from contractual defaults and statutory obligations, the tenant may also resort to one fairly common cause of action, wrongful eviction, and two other less likely and more difficult allegations of wrongdoing by the landlord, constructive eviction and common law fraud.

 1) Wrongful Eviction.

 One of the more common reported causes of action by tenants against landlords relates to the tenant’s unjustified removal from the premises. The case of McKenzie v. Carte, 385 S.W.2d 520, 528 (Tex. Civ. App.—Corpus Christi 1965, writ ref’d n.r.e.) sets forth the requirements of proving wrongful eviction as follows:

 “When the landlord wrongfully evicts the tenant, the latter shows a cause of action for damages by averring and proving the following facts: (1) the existence of an unexpired contract of renting; (2) occupancy of the premises in question by the tenant; (3) eviction or dispossession by the landlord; (4) damages attributable to such eviction.”

In McKenzie, a landlord leased its second floor premises to a tenant for the purpose of operating a private club. The club became a successful business until the landlord changed the lock on the premises, refusing to allow the then sublessee, Westover, to enter the premises, because the landlord “did not like the way Westover was operating the club.” Id. at 523. The McKenzie court affirmed the lower court ruling that the tenant had been wrongfully evicted.

 2) Constructive Eviction

 As a general rule, depriving the tenant of the beneficial use or enjoyment of the whole or a material part of the demised premises by some intentional or permanent act or omission of the landlord constitutes an eviction. .

 (a) Elements. Like the warranty of suitability (express or implied), the facts of the case are extremely important in establishing constructive eviction. In order to prove a claim of constructive eviction, four essential elements must be established. As stated earlier, the four elements are as follows:

 (i)An intention on the part of the landlord that the tenant shall no longer enjoy the premises, which intention may be inferred from the circumstances;

 (ii)A material act by the landlord or those acting for him or with his permission that substantially interferes with the use and enjoyment of the premises for the purpose for which they are let;

 (iii)The act must permanently deprive the tenant of the use and enjoyment of the premises; and

 (iv)The tenant must abandon the premises within a reasonable time after the commission of the act.

 Downtown Realty, 748 S.W.2d at 311; see also eMetroplex Glass Center v. Vantag Properties, 646 S.W.2d 263, 265 (Tex. App.—Dallas 1983, writ ref’d n.r.e.); Lazell v. Stone, 123 S.W.3d 6, 11-12 (Tex. App.—Houston [1st Dist.] 2003);

(b) Abandonment. Abandonment occurs when a tenant moves out of the leased property prior to the expiration of the lease. See Tea Cake, 8 S.W.3d at 22 (Tex. App.—Houston [14th Dist.] 1999, pet. denied). However, as this article examined earlier in the context of a breach of the covenant of quiet enjoyment, Texas courts have struggled in determining when it is reasonable for a tenant to abandon the premises for purposes of satisfying this element of the cause of action. While the Texas courts have not established a particular time period that constitutes “a reasonable time” to abandon the premises after the commission of an act by the landlord, many cases have considered the issue. The prevailing facts of each case define what may be “reasonable”. For example, the court in Briargrove Shopping Center v. Vilar, Inc., 647 S.W.2d 329, 335 (Tex. App.— Houston [1st Dist] 1982, no writ) found that three months was a reasonable time to abandon where construction eliminated a parking lot used by a tenant to park cars from his auto repair shop. In Richker v. Georgandis, 323 S.W.2d 90, 96-97 (Tex. Civ. App.—Houston 1959, writ ref’d n.r.e.) nine months was found to be a reasonable amount of time where a construction barricade on the sidewalk in front of tenant’s restaurant impeded the access to tenant’s business.

(c) The Act. Another interesting facet of constructive eviction is the nature of the landlord’s act that leads to a constructive eviction. The general rule in Texas is that a third party, acting without the landlord’s consent, cannot cause a tenant to be constructively evicted. However, unlike the Coleman case cited above in my discussion of the breach of an implied warranty of suitability, one court has found that the failure to control third parties can lead to constructive eviction. In Fidelity Mutual Life Insurance Company v. Kaminsky, the court allowed a jury to view the landlord’s failure to act in controlling protestors to be a material omission that caused the tenant’s abandonment of the premises. 768 S.W.2d 818, 822 (Tex. App. – Houston [14th Dist.] 1989, no writ). Dr. Kaminsky was a gynecologist who performed elective abortions and had leased the space for the purpose of practicing medicine. About one year after moving into the office, anti-abortion protests began and continued for about six months, until Dr. Kaminsky abandoned the premises. Fidelity tried to remove the protestors by drafting a letter threatening them with trespass prosecutions. Fidelity also gave this letter to Dr. Kaminsky to distribute. The jury saw Fidelity’s response as insufficient, and the court found that there was a legally sufficient basis for the jury to conclude that Dr. Kaminsky abandoned the premises because of the landlord’s failure to act (not because of the acts of the protestors). Id.

3) Common Law Fraud.

  Common law fraud is another landlord violation which does not categorize well into either a breach of contract or statutory violation. To successfully assert common law fraud, a plaintiff must assert that:

 (a) a material representation was made;

 (b the representation was false;

 (c) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of its truth and as a positive assertion;

 (d) the speaker made the representation with the intent that it should be acted upon by the party;

 (e) the party acted in reliance upon the representation; and

 (f) the party thereby suffered injury.

 III. REMEDIES

 Although somewhat difficult to divorce a remedy from the act leading to the remedy, Ihave attempted to segregate in the categories below the various remedies which may be available to tenants resulting from the foregoing list of landlord defaults. I have also attempted to set out the relevant damages available under those remedies.

 A. Suit for Damages.

 The most common remedy for landlord default is a suit for damages. That remedy is appropriate in a variety of situations.

 1) Wrongful Eviction.

Probably the most common suit for damages by a tenant results from wrongful eviction. The cases in this area appear to offer primarily three different types of damages to a tenant for a wrongful eviction. In a few cases, the courts have made broad statements that a tenant, having been wrongfully evicted, is entitled to recover for any loss or injury which is a foreseeable consequence of the eviction. Charalambous v. Jean Lafitte Corp., 652 S.W.2d 521, 526 (Tex. App.—El Paso 1983, writ ref’d n.r.e.). Most courts will also allow a claim for special damages by a tenant who has been wrongfully evicted, including lost profits, where such loss is shown to be the natural and probable consequence of the act or omission complained of, but not where such profits are dependent on uncertain and changing conditions. Pederson v. Dillon, 623 S.W.2d 696, 698 (Tex. App.—Houston [1st Dist.] 1981, no writ). Other courts indicate that the proper measure of damages for wrongful eviction is the difference between market rental value of the leasehold for the unexpired term and the stipulated rentals set forth in the lease. Briargrove Shopping Center Joint Venture v. Vilar, Inc., 647 S.W.2d 329, 336 (Tex. App. – Houston [1 Dist.] 1982, no writ); McNabb v. Taylor Oil Field Rental Co., 428 S.W.2d 714, 716 (Tex. Civ. App. 1968, writ ref’d n.r.e.).

 2) Failure to Maintain.

 Where the landlord has a duty to maintain a portion of the premises, the landlord will be liable to the tenant for damages for failure to repair. McCreless Properties, Ltd. v. F. W. Woolworth Co., 533 S.W.2d 863 (Tex. Civ. App.—San Antonio 1976, writ ref’d n.r.e.). Birge v. Toppers Menswear, Inc., 473 S.W.2d 79, 84. Tort liability may also accompany a landlord’s failure to properly maintain the portion of the premises for which it has retained contractual responsibility or control (such as common areas).

 The court in Briargrove also noted in a footnote, citing Birge v. Toppers Menswear, Inc., 473 S.W.2d 79 (Tex. Civ. App.— Dallas 1971, writ ref’d n.r.e.), that a wrongfully evicted tenant may not recover the difference between the market value of the property and the stipulated rentals when lost profits are also recovered. It appears, however, that such multiple awards are only impermissible when the overall award results in a double recovery of the same damages.

     3) Other.

 Damages have been granted by Texas courts in a number of other default type situations, including, without limitation, the following:

 (a) wrongful removal of sign, Pringle v. Nowlin, 629 S.W.2d 154 (Tex. App. – Fort Worth 1982, writ ref’d n.r.e.);

 (b) breach of covenant of quiet enjoyment, Frazier v. Wynn, 492 S.W.2d 54 (Tex. Civ. App Amarillo 1973, writ ref’d n.r.e.);

 (c) constructive eviction, Briargrove Shopping Ctr Joint Venture v. Vilar, Inc., 647 S.W.2d 329, 336 (Tex. App.—Houston [1st Dist.] 1982, no writ);

 (d)  unreasonably withholding consent to lease, Mitchell’s, Inc. v. Nelms, 454 S.W.2d 809 (Tex Civ. App.—Dallas 1970, writ ref’d n.r.e.); and

 (e) failure to deliver possession, Fabrique Inc. v. Corman, 796 S.W.2d 790 (Tex. App.—Dallas 1990, writ denied per curiam).

 B. Rescission.

 The equitable remedy of rescission is available to tenant, but only in limited circumstances, including the following:

 1) Fraud.

 Generally, rescission will not be available to a tenant due to a breach of the lease by a landlord in                                                     the absence of a finding of landlord fraud. Freyer v. Michels, 360 S.W.2d 559, 561 (Tex. Civ App.—Dallas 1962, writ dism’d). This concept is generally based on the theory that a tenant has a remedy at law, namely a suit for damages. Id. Rescission is, however, available in a real estate setting if fraud can be proved. Texas Indus. Trust, Inc. v. Luck, 312 S.W.2d 324 (Tex. Civ. App.—San Antonio 1958, writ ref’d); Adickes v. Andreoli, 600 S.W.2d 939 (Tex. Civ. App.—Houston [1st Dist.] 1980, writ dism’d).

 2) Breach of Warranty of Suitability.

 Although the court called it cancellation and not rescission, the case of Henry S.Mille Management   Corp. v. Houston State Assoc., 792 S.W.2d 128, 131 (Tex. App.—

 G-17

Houston 1990, writ denied) held that the “equitable remedy” of cancellation is available

upon a breach of the implied warranty of suitability.

 3) Mutual Mistake

Finally, at least one court has found that a mutual mistake will provide grounds for th cancellation of a lease. Nelms v. Cox, 327 S.W.2d 785, 787 (Tex. Civ. App.— Eastland 1959, writ ref’ n.r.e.). In Nelms, the landlord (Nelms) leased the premises to Cox to be operated as “a dance hall and beer tavern and not otherwise.” Subsequently both learned that a city ordinance prohibited the use of the premises as a dance hall. The court found that under these circumstances, there was such mutual mistake as would justify cancellation.

 C  Relief from Rent and Termination.

Until Davidow, the general rule regarding lease covenants was that the covenant to pay rent was independent of the covenants of landlord to repair or otherwise perform obligations under the lease. Edwards v. Ward Assoc., Inc., 367 S.W.2d 390, 393 (Tex. Civ. App.—Dallas 1963, writ ref’d n.r.e.); Mitchell v. Weiss, 26 S.W.2d 699, 700 (Tex. Civ. App.—El Paso 1930). However, some violations of the lease by the landlord will result in a total bar to tenant’s further obligations under the lease, including the obligation to pay rent.

 1) Constructive Eviction.

 The actions constituting constructive eviction of a tenant lead to a release of the tenant from its obligations       under the lease. Downtown Realty, Inc. v. 509 Tremont  Building, Inc., 748 S.W.2d 309, 313 (Tex. App Houston [14th Dist.] 1988, no writ). This makes perfect sense, because the tenant has, for all practical purposes, been impliedly evicted from the premises and therefore cannot enjoy the benefit of the lease through no fault of its own.

 2) Breach of Wary of Suitability.

 Likewise, the court in Davidow v. Inwood North Professional Group – Phase I, 747 S.W.2d 373, 377 (Tex. 1988), made it clear that a breach of implied warranty of suitability justifies the tenant’s abandonment of the leased premises and the discontinuation of further rental payments. Id. at 377. In fact, the court has stated that a

tenant’s obligation to pay rent and a landlord’s implied warranty of suitability are mutually dependent. Id.; McGraw v. Brown Realty Co., 195 S.W.3d 271, 276 (Tex. App.—Dallas 2006, no pet.). Similarly, the court in Neuro-Developmental Associates of Houston v. Corporate Pines Realty Corp., 908 S.W.2d 26, 28 (Tex. App.—Houston [1st Dist] 1995, writ denied) stated

  “…a finding of breach of implied warranty of suitability alone, without a finding of producing cause of damages, is a complete defense to liability for past due rent.”

  3) Other.

 The related thread in all of the cases which excuse tenants from further obligations appears to be the inability of the landlord to deliver the premises for its intended purpose. A further chink in the landlord’s armor of independent covenants is represented by the case of Corman v. Fabrique, Inc., 806 S.W.2d 801, 802 (Tex. 1991), in which the Texas Supreme Court upheld a lower court finding that the failure to give up possession to a subsequent tenant assignee relieves such assignee of its rental obligations under the lease. In Corum Management Co., Inc. v. Aguayo Enterprises, Inc., 755 S.W.2d 895 (Tex. App.—San Antonio 1988, writ denied) the court upheld a jury finding that the tenant was not obligated to pay any rents to the landlord after a knowing misrepresentation by the landlord, if the misrepresentation caused the tenant to execute the lease in the first place. The court reasoned that the tenant should be relieved if, absent the misrepresentation, the tenant would not have signed the lease and, therefore, never would have been obligated under the lease. Id. at 900. And finally, the case of Regency Advantage Ltd. Partnership v. Bingo Idea – Watauga, Inc., 936 S.W.2d 275 (Tex. 1996) represents an interesting finding by the court. In Regency, the tenant leased space under an agreement which provided that if the tenant obtained necessary approvals for a bingo facility, the landlord would build out the premises within 45 days.

The tenant obtained the permit and the landlord failed to build out the space within the allotted time period. The landlord (Texas American Bank) subsequently deeded its interest to Regency Advantage Limited Partnership. In finding the assignee landlord not liable because the breach occurred prior to the transfer, the Texas Supreme Court said:

  “Our conclusion does not mean that Bingo was without any rights against Regency. As comment h to section 16.1 of the Restatement further explains, in situations in which the original lessor has breached a lease prior to transferring the lease to its assignee, the other party to the lease may be entitled to terminate the lease for the past breaches and if so the transferee’s position under the transfer may be affected accordingly. RESTATEMENT (SECOND) OF PROPERTY § 16.1 cmt. H (1977). In other words, while Regency was not liable to Bingo for TAB’s breach, Bingo may have had the right to terminate or a defense against payment of rent to Regency.”

 Id. at 277-278. Although the court provides no other reasoning for its statement, their rationale must relate to the fact that the tenant was never able to occupy, because the landlord did not build out the premises.

Continuing Breaches Repairing Covenants:

If the property is in disrepair at the time of the proposed assignment the landlord will often wish to use the leverage of granting or withholding consent as a means of enforcing compliance with the tenant’s repairing covenants. Where the disrepairs are of a serious nature the landlord may be justified in withholding consent in these circumstances.

Orlando Investments Ltd v Grosvenor Estates Belgravia [1989] 2 EGLR 74

 The current tenants were themselves assignees from the original tenant. The property was in a serious state of disrepair when the lease was assigned to them and this situation continued during their occupation of the premises. They eventually agreed with the landlord that they would undertake certain repairs by reference to an agreed schedule of dilapidations. Before any of these works had been started they sought consent to assign the lease. The proposed assignees also occupied the next door property and it was clear that they were more interested in redeveloping the two properties than in undertaking the repairs in the schedule. The landlord therefore refused to consent unless the assignee was first prepared to provide an undertaking to do the repairs and to provide security for this.

Held: The landlord had acted reasonably in withholding consent in these circumstances.

Note however that a continuing breach of covenant to repair will not always amount to a reasonable refusal – it depends on the seriousness of the breach. There has to be an extensive long-standing breach where the landlord would need to be satisfied that the proposed assignee would not remedy it. A mere dispute with a tenant over repairing obligations would not suffice: Beale v Worth [1993] EGCS 135.

 Breach of User Covenant

 It may well now be reasonable for a landlord to withhold consent to an assignment if he has good grounds for believing that the assignee of references to the landlord together with some unaudited accounts in respect of their existing business.

 Some of the property valuations associated with these accounts were also found to be unreliable. The landlord refused consent to assign to this assignee.

 Held: The landlord had acted reasonably. The documentation which had been provided was not such as to remove a reasonable landlord’s doubts about the assignee’s ability to meet the financial commitments under the lease.

 Continuing Breaches of Repairing Covenants

 If the property is in disrepair at the time of the proposed assignment the landlord will often wish to use the leverage of granting or withholding consent as a means of enforcing compliance with the tenant’s repairing covenants. Where the disrepairs are of a serious nature the landlord may be justified in withholding consent in these circumstances.

 Orlando Investments Ltd v Grosvenor Estates Belgravia [1989] 2 EGLR 74

The current tenants were themselves assignees from theoriginal tenant. The property was in a serious state of disrepair when the lease was assigned to them and this situation continued during their occupation of the premises. They eventually agreed with the landlord that they would undertake certain repairs by reference to an agreed schedule of dilapidations. Before any of these works had been started they sought consent to assign the lease. The proposed assignees also occupied the next door property and it was clear that they were more interested in redeveloping the two properties than in undertaking the repairs in the schedule. The landlord therefore refused to consent unless the assignee was first prepared to provide an undertaking to do the repairs and to provide security for this.

 Held: The landlord had acted reasonably in withholding consent in these circumstances.

 Note however that a continuing breach of covenant to repair will not always amount to a reasonable refusal – it depends on the seriousness of the breach. There has to be an extensive long-standing breach where the landlord would need to be satisfied that the proposed assignee would not remedy it. A mere dispute with a tenant over repairing obligations would not suffice: Beale v Worth [1993] EGCS 135.

IV.  CONCLUSION

Although the negotiating leverage between a landlord and tenant may often result in a tenant being unable to obtain express remedies in a lease for landlord default, a tenant is certainly not without assistance through statute and common law. A creative attorney representing a tenant in a landlord default situation should be able to explore a number of avenues to protect the client’s rights. My own view of the case law is that courts have recently moved towards a more tenant friendly approach when dealing with bad landlord behavior, withdrawing from the independent covenant concept and expanding the remedies available to tenants.

 Bibliography:

Primary Sources

Kelsen’s academic publications span over almost seven decades in which he published dozens of books and hundreds of articles. Only about a third of this vast literature has been translated to English. Kelsen’s two most important books on the pure theory of law are the first edition of his Reine Rechtslehre, published in 1934 and recently (2002) translated. The second edition, which Kelson published in 1960 (translated in 1967) is a considerably extended version of the first edition. In addition, most of the themes in these two books also appear in Kelsen’s General Theory of Law and State.

 Reference:

  • Kelsen, Hans (1928) “The Idea of Natural Law,” in his Essays in Legal and Moral Philosophy (1973) ed. O. Weinberger, trans. P. Heath .Dordrecht: Reidel.

  • Kelsen, Hans (1967). Pure Theory of Law, trans. M. Knight. Berkeley: University of California Press.
  • Raz, Joseph (1979). The Authority of Law. Oxford: Clarendon Press.
  • Raz, Joseph (1986) The Morality of Freedom. Oxford: Clarendon Press.
  • Raz, Joseph (1990). Practical Reason and Norms. Princeton: Princeton University Press.
  • Raz, Joseph (1995). Ethics in the Public Domain: Essays in the Morality of Law and Politics. Oxford: Clarendon Press
  • Harris, J.W., 1980, Legal Philosophies, chapter 6, London: Butterworths.
  • Hart, H.L.A., 1961, The Concept of Law, chapter 3, Oxford: Clarendon Press.
  • 1970, ‘Kelsen’s Doctrine of the Unity of Law’, in H.E. Kiefer and M.K. Munitz (eds), Ethics and Social Justice, pp. 171–199, New York: State University of New York Press.
  • Marmor, A., 2001, Objective Law and Positive Values, Oxford: Oxford University Press.
  • Forthcoming, Philosophy of Law, the Princeton Series in the Foundations of Contemporary Philosophy (S. Soames ed.), Chapter 1, Princeton: Princeton University Press.
  • Paulson, S., 2002, Introduction to Kelsen’s Introduction to the Problems of Legal Theory, p. xvii, Oxford: Clarendon Press.
  • Raz, J., 1980, The Concept of a Legal System, (2nd ed.) Oxford: Oxford University Press.
  • 1979, ‘Kelsen’s Theory of the Basic Norm’ in Raz, the Authority of Law, pp. 122–145, Oxford: Oxford University Press.
  • Tur, R.H. & Twining, W. (Eds), 1986, Essays on Kelsen, Oxford: Clarendon Press.

 Other Internet Resources

www.lawlectures.co.uk

Metroplex Glass Center v. Vantag

. Freyer v. Michels

www.jw.com

www.legal500.com/…/landlord_and_tenant_procedures_and_remedi.

images.jw.com/com/publications/963

www.saderlawfirm.com/…/legal-options-available-when-your-tenant-..

© Paul Chynoweth 2004

 

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