Richman Published in Crain’s on Commercial Leases

March 3, 2014

Senior Counsel Stephen D. Richman wrote the article, “Watch Your Language with Commercial Leases,” for the March 3, 2014 real estate blog of Crain’s Cleveland Business.

Courts typically will uphold language in a commercial lease, unless it is contrary to statutory law or public policy. They presume commercial parties are on equal footing and can afford lawyers, so consequently, commercial landlords and tenants have a lot of leeway in allocating the risk and responsibility of issues inherent in commercial leases.
Because of this judicial deference to lease language, however, you must say what you mean, precisely, or a judge will decide what you meant. In other words, if a commercial lease is clear and unambiguous, courts will review only the plain meaning of the lease to resolve a dispute, and not consider extrinsic evidence of the parties’ intent behind the language. All too often, the wrong word, and even the wrong rule of grammar, can have costly consequences.

Use the right word

When allocating responsibility for maintenance and repairs, most commercial landlords intend for their tenants to make most of the repairs, especially in a long term, triple net (NNN) lease. But what about “replacements?” Does repair mean replacement? Some landlords may think so. However, most courts have decided that if a landlord wants a tenant to replace the roof, for example, vs. patch it periodically, the lease must provide, to the effect that “it shall be the tenant’s obligation to repair and replace the roof.”
In a recent case on point, a commercial NNN lease with a 20-year term contained the following clause: “Tenant shall repair and maintain in good and safe condition, the following items: roof; HVAC …” The landlord in this case intended that the tenant make all repairs and replacements. However, the court determined the list to be a list of repair obligations, not replacement obligations. Simply stated, most courts have held that “an express covenant to repair will not be enlarged by [language] construction…a covenant to repair does not include a covenant to replace.”

Grammar counts

Even the failure to follow a seemingly trivial grammar rule (the use of i.e. vs. e.g.) can result in unintended consequences.
In a 1995 Connecticut case, the tenant intended for the landlord to make all of the “structural repairs”, including the roof. The lease, which failed to define “structural repairs”, contained the following language: “Landlord is responsible for structural repairs only, i.e., foundation, exterior walls and storefront, provided tenant keeps up the maintenance.”
The court in this case held that the landlord was not responsible to make roof repairs because “roof” was not included in the list of items provided in the lease.
The court explained that “i.e.” means “that is” and “e.g.” means “for example.” Consequently, the use of “i.e.” served to limit landlord’s structural responsibility to only those items listed in the lease vs. merely providing examples of the kinds of structural repairs for which the landlord would be responsible. The court determined that the language of the lease was clear and unambiguous, and therefore, it would not consider evidence of the parties’ intent.
What is the moral of this story? In the land of commercial leasing, “you are what you write.” Consequently, landlords, tenants and their lawyers must always be mindful of the fundamentals to avoid non-budgeted for expenses and unexpected liabilities. In other words, it is time to consult our old grammar school notes.