Owner Responsible for Tenant's Water-Damaged Goods

Facts: Shortly after a tenant leased retail space in a shopping center to operate her clothing store, water began seeping through leaks in the roof. By June 2006 the entire store was flooded, damaging much of the inventory. After a brief re-opening, the tenant's store was closed permanently in November 2006. The tenant sued the owner for breach of its lease obligation to provide a serviceable roof.

The trial court ruled in favor of the tenant, and awarded $298,762.56 in damages—$282,618 for two-thirds of the value of the lost inventory, $11,014.50 for incidental expenses incurred in attempting to mitigate damages, and $5,130.06 as a return on the security deposit. The owner appealed.

Decision: The appeals court upheld the trial court's decision in favor of the tenant.

Reasoning: The appeals court found that because maintenance of the roof was in the exclusive control of the owner when it replaced the shopping center's roof between September 2005 and February 2006, it bore the sole responsibility to assure that the new roof would be in good repair “as required by the lease terms.” As the drafter of its lease with the tenant, the appeals court pointed out, it could have expressed an exemption in the lease if it desired to be exempt from all liability for losses sustained by the tenant. However, based on the actual terms of the lease, the failure to provide a serviceable, leak-free roof constituted a breach; thus, it did not absolve the owner from liability for damage to the tenant's inventory.

• Landmark HHH, LLC v. GI HWA Park, January 2009