When a commercial landlord breaches under the terms of the lease it executed with a tenant, the tenant has a variety of legal options available to it in order to recover its damages. In a recent Broward County case before the 4th District Court of Appeal, the tenant achieved a partial victory but lost some of its claims because they were too speculative.
Victoriana Building LLC was a commercial landlord leasing space in Fort Lauderdale. A Victoriana tenant sued the landlord for a breach of the lease. The tenant sought to recover damages for its lost business value and its out-of-pocket expenses. The trial court found the landlord liable for breaching the lease, but it did not award the tenant damages for either its lost business value or its out-of-pocket expenses. On each basis for recovery, the trial court concluded that the tenant’s proof was too speculative to justify an award.
Both sides appealed. The appeals court agreed with the tenant that the landlord was liable for breaching the lease. The proof at trial clearly showed that the landlord had failed to provide fire egress from the building that complied with the applicable code. This was a failure to perform under the lease and justified the trial court finding in favor of the tenant on the issue of liability.
The appeals court also agreed with the trial court that the tenant was not entitled to damages for lost business value, since that loss was too speculative. Under Florida law, a business may prove its lost profits through one of two techniques: “(1) the before and after theory; or (2) the yardstick test.” For businesses that have operated for a relatively shorter length of time, the yardstick method is the more commonly used, since they lack earnings records long enough for the before-and-after technique.
The yardstick method essentially involves finding a comparable entity and using that business’ profits as the “yardstick” for determining damages. In this case, the tenant failed to offer a comparable entity to serve in the role of the yardstick, instead relying solely on a consultant’s forecast. This proof was insufficient and left the tenant’s lost business value claim as too speculative to permit recovery.
The appeals court, however, did agree with the tenant on the out-of-pocket expenses, reversing the trial court. The terms of the lease commanded the tenant to prepare the leased property for a specific use. The tenant had evidence that it incurred “actual and necessary expenses” in pursuit of that goal. The tenant’s proof showed that it had racked up $975,985 in out-of-pocket expenses, which the appeals court concluded was an amount the tenant was entitled to recover.
A landlord’s breach of a commercial lease presents many issues for the tenant harmed by that breach, including amassing the right volume and type of proof to clear the “too speculative” hurdle. For answers to your breach of commercial lease questions, and representation you can count on, talk to the skilled Florida commercial litigation attorneys at Stok Folk + Kon. Our diligent attorneys can help guide you through every step of your case.
Contact us online or by calling (954) 237-1777 to schedule your consultation.
More blog posts:
What to Include in Your Florida Eviction Complaint Against a Commercial Tenant, Florida Business Lawyers Blog, May 18, 2015
Landlord Free to Refuse Lease Extension for Any Reason, Florida Appeals Court Says, Florida Business Lawyers Blog, Nov. 5, 2014