Landlord and Tenant: Tenant attempts to avoid duty-to-repair obligation

Where a lease required the tenant to repair the property at the conclusion of the lease, but the commercial tenant argued this obligation was extinguished because the landlord intended to demolish the building, the court held that the tenant’s obligation is not extinguished. But the proper measure of damages is the diminished value of the unrepaired property and not the cost of making the futile repairs.

Background

In this commercial landlord-tenant dispute, the issue before the court is whether a landlord’s decision to demolish a leased building at the end of the lease relieves the tenant from its duty to repair the soon-to-be-destroyed building.

Analysis

The landlord’s decision on the disposition of its property after the lease expires does not relieve tenant from any contractual duty to repair the property. However, how landlord disposes of its property can determine whether the damages are cost of repair or diminution of value to the property from the lack of repair.

If the parties’ lease requires tenant to make certain repairs and tenant failed to do so, and if landlord will really demolish its leased building when the lease concludes, making tenant complete the repairs (or, by proxy, paying the value of those repairs) is economic waste. Therefore, in such an instance, the proper measure of damages is the diminished value of the unrepaired property and not the cost of making the futile repairs. When this matter proceeds to trial, tenant must prove landlord’s intent to demolish the property if it wants to be subject to diminution of value damages as opposed to cost of repairs damages.

Defendant’s partial plea in bar overruled.

Oakton NLA LLC v. AT&T Services Inc., Case No. CL-2023-7973, Oct. 28, 2024. Fairfax County Circuit Court (Oblon). VLW 024-8-076. 5 pp.