Imagine a commercial tenant is renting office space. The tenant needs to make some changes to accommodate the needs of their business, and the landlord is allowing the tenant to make any changes they wish to the space. However, the landlord has one condition—if the tenant wants to tear down walls or drill any holes into the ceiling or floor, then the tenant must first get an asbestos inspection. Unfortunately, the inspection reveals asbestos in the ceiling. Even more unfortunately, there is a clause in the tenant’s lease which requires the tenant to rectify any hazardous conditions they create on the premises, including abating any asbestos they disturb. Is the tenant required to pay for the abatement? Maybe not.
Luckily, there are certain protections in the law for commercial tenants that discover hazardous conditions on their leased premises. These include the implied warranty of suitability and constructive eviction. Either of these doctrines, alone or in conjunction with one another, can exempt the tenant from the legal obligation to pay rent or allow the tenant to terminate the lease before the end of the lease term without having to pay any penalties for breaking the lease.
The warranty of suitability is implied in all commercial leases in Texas unless waived in the lease. It is essentially a guarantee from the landlord that “at the inception of the lease, there are no latent defects in the facilities that are vital to the use of the premises for their intended commercial purpose and that these essential facilities will remain in a suitable condition.[1]” This warranty only protects against latent (i.e., underneath the surface and not immediately visible to the naked eye without subsurface investigation), not patent (i.e., on the surface and visible to anyone who is not blind), defects. Asbestos is a latent defect because it is not visible to the naked eye, and it is only present within the walls, ceilings, and floors. Therefore, the warranty of suitability protects commercial tenants from the presence of asbestos.
Furthermore, if a commercial landlord breaches the warranty of suitability, then the tenant is no longer required to pay rent. Therefore, if a commercial tenant discovers asbestos in their leased space, then the tenant may stop paying rent until the condition is fixed because the landlord’s job is not just to provide a habitable space, but to ensure that it remains habitable for the entirety of the lease.
Unfortunately, the warranty of suitability, while helpful, can be very easily waived. For example, if the tenant signed a lease which explicitly requires the tenant to repair or otherwise address hazardous conditions such as asbestos on the premises, then the tenant has inadvertently waived the warranty of suitability.
However, there is another available means for relief.
Constructive eviction occurs when a tenant vacates a leased premises before the end of the lease term because of conduct by the landlord which interferes with the tenant’s use and enjoyment of the premises.[2] A constructive eviction terminates the mutuality of obligation for lease terms because the fundamental reason for the lease’s existence is destroyed.[3] So, if there is truly a constructive eviction, then the tenant is no longer required to pay rent and the tenant may even be able to terminate the lease without having to pay a penalty.
However, to be able to stop paying rent under the lease or terminate it early based on constructive eviction, the tenant must prove four elements. First, the tenant must show an intention on the part of the landlord that the tenant no longer enjoy the premises.[4] Second, the tenant must show a material act by the landlord that substantially interferes with the tenant’s intended use and enjoyment of the premises.[5] Third, the tenant must show the landlord committed an act that permanently deprived the tenant of the use and enjoyment of the premises.[6] And fourth, the tenant must abandon the premises within a reasonable time after the landlord’s commission of the depriving act.[7]
The first factor, the landlord’s intention that the tenant no longer enjoy the leased premises, may be inferred from the circumstances.[8] For example, if a landlord changes the locks on the leased premises, courts infer the landlord intended that tenant no longer enjoy the premises.[9] In the context of asbestos, this factor is arguably met if the landlord refuses to let the tenant back on the premises until the tenant pays for the abatement or if the landlord refuses to perform the abatement entirely.
The second factor requires a material act by the landlord that interferes with the tenant’s intended use and enjoyment of the leased premises. The material act may be an affirmative act or an omission.[10] Per federal OSHA regulations, building owners must determine and notify prospective tenants of the presence, location, and quantity of any asbestos-containing material (ACM) or presumed asbestos-containing material (PACM) at work sites in their buildings before work in the areas containing ACM or PACM begins.[11] The regulations further note that PACM includes materials found in buildings constructed before 1980.[12] Thus, landlords leasing spaces in buildings older than 1980 are required inspect for the presence of asbestos and to inform tenants of its presence. In the tenant’s context, this factor will be met provided the building is constructed prior to 1980 and provided that the landlord failed to test for asbestos and inform tenants of its presence.
The third factor requires that the landlord’s act permanently deprive the tenant of the use and enjoyment of the premises. “Permanent” does not have its ordinary meaning here, and courts decide on a case-by-case basis whether the deprivation is permanent enough to satisfy this prong.[13] In our context, if the landlord requires the tenant to pay for the abatement before allowing the tenant back on the premises, then the tenant is deprived of the use and enjoyment of the premises unless the tenant agrees to pay the thousands of dollars. Thus, this prong is arguably met if the landlord requires the tenant to pay for abatement before allowing the tenant back on the premises.
The fourth and final factor is the simplest—it requires that the tenant vacate the premises within a reasonable amount of time after the material interfering act occurs. What constitutes a “reasonable amount of time” is determined on a case-by-case basis.[14] For example, a court has found that 13 months was a reasonable time to vacate the premises in a case in which an expert testified that such a move would take between 12 to 18 months.[15] However, the tenant must vacate the premises because of the interfering act and not because of another reason.[16] Therefore, the affected tenant simply needs to vacate the premises because of the asbestos within the time the tenant requires to wind up their affairs.
Constructive eviction and the warranty of suitability provide commercial tenants with protection against hazardous substances on their leased premises. However, commercial tenants should still carefully read and negotiate their commercial leases before signing because these protections may be unavailable or waived. And without such protections, the commercial tenants may not have a way out of the unfavorable lease. If you have issues with the language of your commercial lease, consider contacting an experienced construction law attorney at West Mermis to assist you.
[1] Davidow v. Inwood North Professional Group—Phase I, 747 S.W.2d 373, 377 (Tex. 1988).
[2] Williamson v. Howard, 554 S.W.3d 59,69 (Tex. App.—El Paso 2018, no pet.).
[3] Downtown Realty, Inc. v. 509 Tremont Bldg., Inc., 748 S.W.2d 309, 313 (Tex. App.—Houston [14th dist.] 1988, no writ).
[4] Holmes v. P.K. Tubing, Inc., 856 S.W.2d 530, 539 (Tex. App.—Houston [1st Dist.] 1993, no writ).
[5] Id.
[6] Id.
[7] Id.
[8] Holmes v. P.K. Tubing, Inc., 856 S.W.2d 530, 539 (Tex. App.—Houston [1st Dist.] 1993, no writ).
[9] Lazell v. Stone, 123 S.W.3d 6, 12 (Tex. App.—Houston [1st Dist.] 2003, no pet.).
[10] See Holmes v. P.K. Pipe & Tubing, Inc., 856 S.W.2d 530, 539 (Tex. App.—Houston [1st Dist.] 1993, no pet.).
[11] 29 C.F.R. § 1926.1101(k)(2).
[12] 29 C.F.R. § 1926.1101(b).
[13] See Briargrove Shopping Venter Joint Venture v. Vilar, Inc., 647 S.W.2d 329, 335 (Tex. App.—Houston [1st Dist.] 1982, no pet.).
[14] Coleman v. Rotana, Inc., 778 S.W.2d 867, 872 (Tex. App.—Dallas 1959, writ denied).
[15] Daftary v. Prestonwood Market Square, Ltd., 404 S.W.3d 807, 816 (Tex. App—Dallas 213, no pet.).
[16] See Nabors v. Johnson, 51 S.W.2d 1081, 1082 (Tex. App.—Waco 1932, no writ).
Jasmine is a litigation associate for West Mermis PLLC. She represents a variety of clients, such as homeowners, general contractors, subcontractors, and insurance companies, in multiple complex litigation matters. Prior to joining West Mermis, Jasmine interned in the Southern District of Texas as well as in the Fourteenth Court of Appeals of Texas. She was also involved in both intra-scholastic and inter-scholastic competitions throughout law school, which earned her multiple awards, including placing as a semifinalist in the Blakely Butler Moot Court Competition and a Quarterfinalist in the Hippard Open Mock Trial Competition.
