Don’t Count on Improvements to Offset Cost of Damage

April 8, 2014
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Although it would be nice if the cost of any improvements you make to the space you rent could offset other charges, such as damage to the premises, later in the lease term, it’s not likely that an owner will see things that way. Don’t count on the cost of your improvements to save you from having to pay for things like damage or destruction. Like the Louisiana tenant that argued that its investment should be put towards fixing damage after it moved out, you’ll most likely waste time and money arguing this point.

In that case, at the time the fitness center tenant moved in, it made substantial improvements to the space but didn’t tell the owner that it had done so. Shortly before the lease was to expire, the tenant and owner talked about renewing the lease. The lease expired before they had made a decision about future rent, but the owner allowed the tenant to stay in the space at the same monthly rent on a month-to-month basis for several months. Instead, the tenant moved out of the space to a strip mall across the street.

The day after the tenant left, the owner inspected the building. It discovered severe damage to the space. The owner sued the tenant. The tenant asserted that any damage was done by trespassers after it vacated the premises. It also claimed that because it already spent a substantial amount of money improving the space it shouldn’t be made to pay for the damage. The trial court ruled in favor of the owner. The tenant appealed. A Louisiana appeals court upheld the decision of the trial court.

The appeals court reviewed the lease, noting that there were two key provisions that applied to the dispute. First, the lease contained a provision specifying that no improvements were to be made by the tenant without the owner’s consent. Therefore, said the appeals court, not only did the lease not provide for the tenant to use the cost of the improvements toward any other items, the improvements were in violation of the lease.

The appeals court also discussed the “Condition and Maintenance” section of the lease, which provided that the tenant accepted the space in its condition at the time the lease started, and that the tenant would keep the space in the same order as it was received during the term of the lease and return it “broom clean and free from trash, and in like good order as received” at the end of the lease or when the tenant moved out. The lease also specified that the owner would keep the security deposit to cover any damage.

The appeals court noted that in cases like this, where an owner claims that the tenant is liable for damages to the leased premises, “the burden of proof is upon the landlord to prove the loss, and damages must be proved to a reasonable certainty.” Here, the owner produced a report from its employee who had inspected the space and found the damage shortly after the tenant moved out. The report included a description of the specific damages and 35 pictures of the space, depicting the damage. To support its claim that damages should be in a certain amount, the owner introduced evidence of estimates for repairs from several contractors. Meanwhile, the tenant had no evidence that third-party trespassers had caused the damage. The owner had met its burden, according to the appeals court [Sigur v. Henritzy, September 2013].


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