Commercial Restaurant Lease Dispute | What To Consider

QUESTION:

We are currently in the final year of a triple net commercial lease for a freestanding building. The building is 45 years old, and we have leased at this location since 1996, having operated a restaurant on site. Since 1996, we have invested in yearly maintenance for the parking lot and roofing, both of which are in poor condition.

Maintenance is no longer enough, and replacement is now required. The landlord has refused to repave the parking lot or replace the roof unless we sign a 5-year lease extension. The poor condition of both the roof and the parking lot are affecting our business, and we cannot continue to operate with the conditions as they are right now.

Can we seek early termination from the lease because the landlord refuses needed replacements?

ANSWER:

In Massachusetts, most commercial leases outline the rights, obligations and responsibilities of both the landlord or owner and the tenant. As a result, the answer to your question is likely to be found in your commercial lease agreement.

Since we have not reviewed your commercial lease, we cannot cite its specific provisions. However, in many commercial leases, the tenant is responsible for maintaining the portion of the property being leased (i.e. the leased space) and the landlord is responsible for maintaining the overall structure and exterior areas. However, this standard arrangement is not a requirement and thus, the arrangement can be different from one commercial lease agreement to another. For this reason, it is essential to have a commercial lease attorney review your lease before you make any decisions that could impact your business and/or have legal consequences.

If our office were working on your matter we would first review the lease agreement to identify any clauses regarding early termination. Many commercial leases do contain language about when an early termination is permitted. If your lease agreement does not outline any conditions for a valid early termination or if you cannot satisfy the stated early termination requirements as outlined in the lease agreement, you will need to determine whether the landlord has breached the agreement.

In Massachusetts, the doctrine of unclean hands states that when a party materially breaches a contract and does not cure the breach, they cannot enforce the contract against the other parties named in the contract. This means if your landlord breached the terms of the lease agreement, he or she cannot enforce the contract against you.

In your case, you may be able to prove breach of contract if the landlord fails to satisfy their contractual duties contained in the lease agreement. For example, if the lease agreement states the landlord is to provide you with a business-ready parking lot and building, you may argue the landlord has failed to meet their obligations here given the disrepair of the roof and the parking lot. You can argue that because the structure and parking lot are unsafe and not suitable for you to carry on your business, the landlord has failed to provide you with what was promised in the lease agreement – a structure suitable for safely operating a restaurant business. If this is the case, you can terminate the commercial lease agreement early and the landlord would not be able to enforce the lease against you. However, you must be sure the landlord has materially breached the agreement before informing the landlord of your intent to terminate the lease early.

Another point to consider — every commercial leasing dispute is unique, and the theories outlined here may not apply to your specific case. A major component of handling commercial leasing disputes is reviewing the specific lease agreement in question.

In addition, while your question concerns terminating the lease early; this is not the only option in a commercial lease dispute. You may be able to reach a settlement with the landlord, in which the landlord agrees to perform repairs by a specific date while you agree to the five-year lease extension. If you intend to keep your business doors open, this settlement may be an option to consider.

Reviewing your lease agreement with our commercial lease attorney, however, should be your first step in determining your rights and options.

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