CONSTRUCTIVE EVICTION

Simply stated, “constructive eviction” is a landlord鈥檚 act or failure to act that substantially interferes with or permanently deprives a tenant from using its leased premises. Constructive eviction relieves tenants from their obligation to pay rent, although in most jurisdictions they also must abandon the premises within a reasonable period of time.

Varying Interpretations

The specific acts or omissions that constitute constructive eviction are not always easy to identify and recent cases highlight the courts鈥 varying interpretations of the doctrine.

In the 1998 case Nicholson Air Services v. Board of County Commissioners of Allegany County, the Maryland Court of Special Appeals listed several acts or omissions that might constitute constructive eviction, including the failure to furnish heat, elevator service, electricity, and sanitary restrooms, if done with the intent to deprive the tenant of its use of the leased premises. In this case, however, no acts of this nature were alleged. Instead, the tenant argued that a landlord鈥檚 notice to vacate constituted constructive eviction. The court disagreed, finding that merely sending the tenant a notice to quit 鈥 even though it also threatened criminal prosecution for trespass 鈥 did not constitute constructive eviction.

In a 1997 New York case, West Broadway Glass Company v. I.T.M. Bar Inc., a landlord leased commercial property knowing that it was unusable due to severe water and sewer problems. Assured that the landlord would fix the problems, the tenant did not abandon the premises. The Appellate Division of the New York Supreme Court found that because the tenant did not leave, there was no constructive eviction (although it did hold that the landlord breached the lease).

However, in a 1998 case, Johnson v. Cabrera, another Appellate Division of the New York Supreme Court held that a landlord鈥檚 failure to fix frozen pipes, which left the tenant without heat or water for two winter months, constituted a constructive eviction that suspended the tenant鈥檚 obligation to pay rent.

A landlord鈥檚 right to relocate a tenant may not shield it from a constructive eviction claim. For example, in the 1998 Louisiana case of Kite v. Gus Kaplan, Inc., the landlord moved a tenant鈥檚 fine-jewelry department, located in a central, high-traffic area that was outfitted especially for the department, including custom-made jewelry display cases, to another less desirable space in the store. In reversing the lower court, the court held that the landlord鈥檚 forced relocation of the tenant鈥檚 operations “for all practical purposes, unlawfully evicted [the tenant] from the lease.”

However, loss of business will not necessarily sway a court. In the 1997 case, St. Louis North Joint Venture v. P&L Enterprises Inc., the U.S. Court of Appeals for the 7th Circuit found that no “rational trier of fact” could conclude that the sporadic closing of one of five mall entrances or the six-month closing of one mall parking lot near the tenant鈥檚 store rendered the leased premises useless.

The Right to Renovate
Renovations often give rise to constructive eviction claims. As noted in St. Louis North, minor inconvenience to a tenant will not support a claim for constructive eviction. In fact, even more extensive and intrusive renovations generally will not support such a claim. In Stinson, Lyons, Gerlin & Bustamante, P.A. v. Brickell Building 1 Holding Company Inc., the U.S. Court of Appeals for the 11th Circuit highlighted the inherent conflict between a tenant鈥檚 “right to quiet enjoyment” and a landlord鈥檚 right to renovate its building and maximize its economic returns. When the tenant and landlord originally negotiated the lease, the building provided first-class amenities. Eighteen years later, however, the building had deteriorated and lacked amenities that newer first-class buildings offered. After occupancy fell to 20 percent, the landlord decided to undertake extensive renovations, many of which could have had a significant impact on the tenant: fire sprinkler installation, asbestos removal, curtain wall replacement, air-conditioning cooling tower and chiller replacement, and new duct installation.

To minimize disruption to the tenant, the landlord agreed to forgo some of the work on the tenant鈥檚 floor and arranged to have the most disruptive work performed over two weekends. In addition, the landlord offered to relocate the tenant to another floor or another building (and pay the difference in any higher rent) or terminate the lease and pay the tenant $350,000. However, the tenant rejected all of the offers, moved into a new building on its own, and sued the landlord for constructive eviction.

In affirming the lower court鈥檚 finding that there was no constructive eviction, the Court of Appeals recognized the inconsistency between the landlord鈥檚 right to conduct renovations under the terms of the lease and the implied covenant of quiet enjoyment in favor of the tenant. The lower court, in rejecting the tenant鈥檚 argument that allowing the landlord to renovate would render the tenant鈥檚 right to quiet enjoyment meaningless, ruled that the landlord had a right to renovate. Because the landlord had acted “reasonably and responsibly,” the Court of Appeals specifically found that the landlord had committed no wrongful act, a necessary element of a claim for construction eviction.

The court concluded that it was “left with the impression” that the tenant was trying to take advantage of the landlord鈥檚 need to renovate to get a “better deal” and made it clear that commercial tenants, who frequently are confronted with a landlord鈥檚 need to renovate, cannot expect to “hold hostage contractually authorized renovations.”

Making a Case
As demonstrated by case law, landlords鈥 acts or omissions can enable tenants to terminate leases on the grounds of constructive eviction. However, these actions must be egregious, violate a landlord鈥檚 duty or obligation, and have a significant effect on a tenant鈥檚 ability to use and enjoy its premises. Without these elements, a tenant will not be able to avoid its lease obligations.

Samuel H. Weissbard, JD, and Camellia K. Schuk, JD
Samuel H. Weissbard, JD, is senior counsel and Camellia K. Schuk, JD, is an associate in the Irvine, Calif., office of Cox, Castle, & Nicholson, LLP. Contact them at (949) 260-4600 or sweissbard@ccnlaw.com and cschuk@ccnlaw.com.The discussion of legal issues in this column is for informational purposes only. Results may vary depending on state laws and individual circumstances.