Lease's Silence on Rent Abatement Meant It Wasn't Permitted

Facts: The owner of a strip mall and a tenant signed a three-year lease for space in which the tenant was to operate its salon and spa. Under the lease, the owner was to “deliver all mechanical systems in good working order per City Code; complete any roof repair; and complete interior water-damage repair.” The owner was also required to deliver the HVAC systems and the electrical and plumbing systems “in good working order.” The tenant vacated the property several months before the end of the lease term, claiming that the owner failed to fulfill these lease obligations.

The owner sued the tenant for rent for the three months prior to moving out. The tenant asserted that, at the time it moved into the space, the property had extensive and material defects. According to the tenant, it submitted written requests for repairs to the owner that were not completed. The tenant alleged that it was required to make repairs at its own cost and was not reimbursed for those repairs. The tenant also said that it vacated the property because its business was suffering due to the insufficient maintenance and repair.

The owner asked the court for a judgment in its favor without a trial. The tenant asked that the owner's claims be dismissed. The trial court granted the owner's request, and the tenant appealed.

Decision: A North Carolina appeals court upheld the lower court's decision in favor of the owner.

Reasoning: On appeal, the tenant argued that the trial court erred in ruling in favor of the owner because the tenant's counterclaims that it made against the owner “raised a genuine issue of material fact” that required a jury determination. The tenant claimed that the trial court incorrectly interpreted the lease's silence on the issue of rent abatement and offset under circumstances like these. That is, the trial court found that “the lease does not contain any provision authorizing or allowing for rent abatement or offset of rent by the tenant under any scenario.” The tenant argued that the fact that the lease is silent with respect to the propriety of rent abatement and offset should not be taken to indicate that rent abatement or offset is not permitted under the lease.

But the appeals court pointed out that the tenant couldn't support its contention. “A lease is a contract, and the provisions of a lease are interpreted according to general principles of contract law,” stated the appeals court. “An interpretation of the effect of a lease's silence on an issue is a question of law and the tenant cites no legal authority in support of its contention that it was entitled to cease payment of rent,” it added.

The appeals court pointed to a past case where it had reviewed the obligations of an owner and a tenant in a commercial setting. “In a commercial lease, the duty of the tenant, if the owner fails to perform his contract to repair, is to do the work himself, and recover the cost in an action for that purpose, or upon a counterclaim in an action for rent, or if the premises are made untenable by reason of the breach of contract, the tenant may move out and defend in an action for rent as upon an eviction,” the appeals court reviewed.

Thus, where a owner breaches its duty to repair in a commercial lease, the tenant may: (1) sue the owner for damages equal to “the difference between the rental value of the premises for the term, in the condition as contracted to be, and the rental value in their actual condition”; (2) make the repairs and collect from the owner the reasonable cost of such repairs; or (3) move out and claim constructive eviction. But here, said the appeals court, the lease's silence on this issue indicated that these options weren't available under the lease agreement, and the tenant had no evidence, testimony, or affidavits to prove otherwise, which would have left a question of material fact that required a trial.

• Nasser v. Dynamic Images Salon and Spa, Inc., August 2011