Has Your Tenant Proven ‘Constructive Eviction'?

Q: A tenant at my shopping center claims that an ongoing plumbing condition in its space is interfering with its business. I’ve been trying to fix the situation, but the problem is extensive and has needed a series of repairs. Now, the tenant is threatening to move out, saying that it has been “constructively evicted.” However, it’s stayed in the space. What is constructive eviction, and could the tenant really prevail on that claim?

A: Not if it continues to operate in its space. To constitute a constructive eviction, the interference by a landlord—here your plumbing issues—with the possession of the tenant or with the tenant’s enjoyment of the premises must be substantial enough so that the tenant can’t use its space and is forced by that situation to move out. A recent Pennsylvania case demonstrated the criteria a tenant needs to meet in order to use construction eviction to terminate a lease.

A national department store tenant withheld its rent and engaged in self-help remedies after the owner of the shopping center repeatedly failed to repair problems with the building, including leaking plumbing and a dilapidated appearance both inside and outside the property. The tenant eventually moved out, alleging that the owner’s actions adversely impacted its business to such an extent that it effectively forced it to abandon the property.

The tenant sued the owner for constructive eviction. The owner sued the tenant for breach of its lease. The tenant also asked for punitive damages—that is, damages awarded in a lawsuit as a punishment for malicious or particularly fraudulent acts.

A jury found in favor of the tenant, entitling it to withhold all rent obligations remaining on the lease at the time of the abandonment, but denying it the opportunity to submit its punitive damage claim to the jury. The owner asked the court for a judgment in its favor notwithstanding the jury’s verdict. The tenant appealed, arguing that the trial court erred in denying it the opportunity to submit its punitive damage claim to the jury. But a Pennsylvania appeals court denied the owner’s request, and the decision was vacated.

The owner asserted that the tenant failed to present evidence sufficient to satisfy the stringent standard governing claims for constructive eviction. The appeals court agreed with the trial court that the tenant had proven that the owner constructively evicted it. To constitute a constructive eviction, the interference by a landlord with the possession of its tenant or with the tenant’s enjoyment of the premises must be of a “substantial nature and so injurious to the tenant as to deprive him of the beneficial enjoyment of a part or the whole of the premises, to which the tenant must respond by abandoning the possession within a reasonable time," the appeals court noted. There is no constructive eviction if it continues in possession, the appeals court specified; possession must be given up by the tenant as a consequence of the owner’s acts. Here, the tenant did leave the premises in a reasonable amount of time after it determined that there was a pattern of the owner’s breaching the lease by refusing to make repairs [Sears, Roebuck & Co. v. 69th St. Retail Mall, L.P., October 2015].