Daily Development for Monday, December 10, 2001

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

LANDLORD/TENANT; TENANT'S REMEDIES; CONSTRUCTIVE EVICTION: New York appellate court recognizes (perhaps erroneously) the concept of "partial constructive eviction."

Arbern Realty Company v. Clay Craft Planters Company, Inc., 727 NYS 2d 236 (Supt Ct. App. Term 2000)

This was a memorandum opinion in which the court clearly didn't realize it was doing something that might be regarded as unusual, but by such things the currents of change are sometimes commenced.

Tenant's lease provided for 20 parking spaces, delineated by a sketch, and further provided that "other tenants use of parking facilityies will not interfere with Tenant's access to the leased premises." When the lease commenced, five of the spaces were not useable (the court doesn't tell us why). Thereafter, another tenant was permitted to construct a loading dock which left Tenant with only eight usable parking spaces and severely limited the access to its own loading dock.

The court here stated that Tenant had suffered a "partial constructive eviction" and upheld a remedy of a 25% rent abatement for past rents and future rents.

The sole authority the court cites for this result is a case in which the court found that a partial blockage of a tenant's loading dock constituted a constructive eviction and abated 100% of the rents.

Comment 1: One of the most well established principles of commercial leasing law is the principle of "independence of covenants," the notion that a tenant may not withhold rent for a breach of lease unless that breach amounts to an effective ouster of the tenant from the premises (a breach of quiet enjoyment.) This principle, of course, has been moderated in the consumer revolution in residential landlord tenant law, and commonly rent withholding is permitted as a remedy for a partial interference with habitability.

But there have been few inroads on the basic rule in the commercial marketplace. In fact, tenants find it difficult to negotiate lease provisions that give them a right to withhold rent in response to a breach. Even if the tenant has bargaining strength, it finds that the landlord's lender is even stronger, and the lender's glowering presence provides the landlord with the necessary incentive to refuse to agree to such a provision.

When a landlord's wrongful conduct renders a portion of the leased space unusable, tenants may be able to argue that they are effectively prevented from conducting their business, and move out of the premises, arguing that they have been constructively evicted. Normally, this results in a termination of the lease. In some cases, however, rent simply abates and the tenant moves back in when the problem is remedied. Note, however, that here we are talking about a 100% deprivation of use, a complete constructive eviction. The cases are quite clear that the tenant cannot simply occupy part of the space and abate the rest of the rent, claiming a partial constructive eviction. The leading case, an old chestnut in the Property casebooks, is a New York Court of Appeals decision, Barash v. Pennsylvania Terminal Real Estate Corp., 256 N.E.

2d 707 (N.Y. 1070).

Where the landlord directly or indirectly physically bars the tenant from a portion of the premises, there is an actual eviction. Here the courts do permit abatement of rent for the portion of the premises that is withheld, and sometimes permit abatement of all the rent even if the tenant enjoys occupancy of some of the other space.

In the instant case, the court readily admitted that the tenant had actual physical access to all of the leased space (although one might have quibbled about the loading dock.) It was quite clear in saying that the landlord's conduct did not deny actual access, but constituted only a constructive eviction.

Comment 2: The case the court relies upon, KRU, Inc. v. 1000 Massapequa, 656 N.Y.S. 2d 47 (1977) was very close on the facts. There, the landlord permitted another tenant to build a fence that prevented trucks from reaching the plaintiff's loading dock. The lease required the tenant to receive all deliveries at that dock. The court acknowledged that the tenant had physical access to its property, but not effective access, since trucks couldn't get in. It found a 100% rent abatement and a 100% future rent abatement until such time as the blockage was cleared.

Although the case arguably involved a complete constructive eviction, the KRU, Inc. decision did describe the theory underlying its result as a "partial constructive eviction. The sole authority it cited was a residential lease case.

Has something happened in New York other than appeals court judges (or their clerks) failing to pay attention in Property I?

The Michigan court here does not cite the UCC provision and does not mention a 90 day requirement.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

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