In a commercial leasing setting, there are many things a landlord can do to strengthen its position against the possibility that the tenant abandons its lease. Before litigation, the landlord can draft its lease to allocate certain risks explicitly to the tenant. During litigation, a landlord that has sued its tenant can make sure that it files all of the available pleadings, including optional ones like a reply to an answer, to counter affirmative defenses by the tenant. In the case of one Central Florida landlord, it didn’t file a reply, it didn’t have explicit risk-allocation terms in its lease, and these helped the tenant win its appeal before the Fifth District Court of Appeal.
The case arose from a failed business in a shopping center in Orlando. After only one year of the lease’s five-year term passed, the tenant, which had been running a daycare, abandoned the premises. The daycare, which required a license from the state to operate, had opened with only a temporary license. After the temporary license expired, and the state had not approved a permanent license, the daycare was no longer allowed to operate legally and closed its doors.
The case went before a trial judge, who issued a summary judgment in favor of the landlord. That judgment gave the landlord not only possession of the property but also an award of past and future rent.
The tenant appealed this ruling, and it won on the issue of rent. One factor in this case for the landlord was a procedural one. After the landlord filed its lawsuit petition, the tenant filed an answer. In that answer, the tenant asserted multiple different affirmative defenses. When a defendant advances affirmative defenses, the plaintiff has the option to file a reply to the answer. If you, as a plaintiff, have information that can refute or negate one or more of the defendant’s affirmative defenses, this reply is where you can present that.
If you don’t reply, the court will consider you to deny the defenses but not to have negated them. Potentially, had the landlord filed a reply, it might have negated one or more of the defenses. The lack of a reply left the appeals court to look at all of the defenses and focus on four of them in particular: impossibility, impracticality, frustration of purpose, and commercial frustration of purpose.
Each of those four defenses had a common thread: “foreseeability at the inception of the lease.” Was it foreseeable that the state would refuse to license this daycare? Furthermore, who assumed the risk of that potential denial? The answer to who assumes which risks can often come down to how your lease is drafted. In this case, the court determined that “the provisions of the lease do not explicitly allocate the risk that the Department would deny Tenant” a permanent lease. Presumably, had the landlord constructed its lease more explicitly regarding the allocation of risk related to licensure decisions by the state, it possibly could have obtained a more favorable outcome in the appeals court.
Since there was still a valid dispute of material fact regarding the foreseeability of the state’s denial decision, the landlord was not entitled to summary judgment on past and future rent.
In your commercial leasing relationships, whether you’re a tenant or a landlord, it is important to have skilled Florida counsel who can help you dot your i’s and cross your t’s. The Florida landlord-tenant attorneys at Stok Folk + Kon have been representing both lessors and lessees for many years and are here to help you with your situation.
Contact us online or by calling (954) 237-1777 to schedule your consultation.
More blog posts:
Commercial Lease Agreement’s Lack of Clarity Sends South Florida Tenant and Landlord Back to Trial Court for More Hearings, Florida Business Lawyers Blog, Jan. 5, 2017
Florida Mall Tenant Launches Class-Action Attack Against Commercial Landlord Over Utility Charges, Florida Business Lawyers Blog, Oct. 21, 2016