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What Damages May a Tenant of Commercial Space Recover in Tennessee?

A couple of Tennessee cases lay out pretty well the kinds of damages a tenant of commercial space may be able to recover in the event the tenant’s landlord breaches the lease agreement by not making repairs or evicts the tenant without grounds.  Keep in mind that an eviction can be constructive. A constructive eviction occurs when the premises become untenantable.  With some frequency, commercial buildings become untenantable because landlords neglect to make repairs or make inadequate repairs.  (A tenant of a commercial building should be very careful about concluding, at least without the input of experienced legal counsel, that a failure of its landlord to make a repair rises to the level of a constructive eviction which would permit it to terminate the lease lawfully.)

In the recent case of Pryority Partnership v. AMT Properties, LLC (Tenn. Ct. App. 2020), the landlord of a commercial building failed to repair a leaky roof on the warehouse it rented to the plaintiff tenant. The tenant was very patient and gave the landlord several months to make the repairs, which repairs the landlord promised from the beginning of the lease it would make.  While the tenant was waiting on the landlord to make the repairs, it could not install several machines that weighed several tons each.

After waiting several months for the repairs to be made to no avail, the tenant terminated the lease. The trial court, which was affirmed in all respects by the Court of Appeals of Tennessee, found that the tenant had been constructively evicted and that the defendant landlord had breached the lease by not repairing the leaking roof.

The trial court awarded the tenant almost $200,000 in damages. Those damages consisted of rent paid by the tenant to the defendant landlord, expenses the tenant incurred to renovate the building, as well as expenses it incurred in relocating to another building.  The court of appeals affirmed this award. The court of appeals noted that a tenant may recover all damages it sustains because of its landlord’s breach which the tenant can prove with reasonable accuracy. Although the tenant in the Pryority case did not request lost profits, the court of appeals pointed out that it could have and that lost profits may be recovered by a tenant in a breach of commercial lease case.

In The Hardison Law Firm, P.C. v. Howell (Tenn. Ct. App. 2003), a law firm had rented Class A space for its offices. The lease required the landlord to provide building security. The landlord failed to provide it and the tenant suffered losses, on at least two occasions, from theft. The tenant law firm terminated the lease and moved to new commercial space.

The court found that the landlord had breached the lease. It awarded the tenant law firm damages for: (1) The $7,000 it spent to put in a new phone system in the building to which it relocated; (2) the amount it had paid to hire security for the building before it relocated; (3) the $84,000 it spent in increased rent for the space to which it relocated. On appeal, the trial court’s award of all categories of damages was affirmed.

With respect to the trial court’s award of increased rent in The Hardison Law Firm case, the court of appeals held that the trial court had used a correct method to calculate the increased rent damages.  The trial court had calculated the increased rent by the difference between the price per square foot the tenant law firm was paying for the defendant’s building and the price per square foot it had to pay for its new space. The trial court calculated the loss based on the remaining term of the lease between the defendant landlord and the plaintiff law firm, with the calculation starting on the date the plaintiff law firm moved out of the defendant’s building.

Considering the kinds of issues and problems that can arise in commercial leases and the complexity of Tennessee law on the subject of the duties and rights of landlords and tenants, before you make any decision about a situation you have with a commercial lease, you would be wise to plug in experienced legal counsel.

 

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