Tenant Could Stop Paying Rent When It Didn't Get TIA

In exchange for the tenant's renovating the building, the owner agreed to pay it a “tenant improvement allowance” (TIA) after “substantial completion” of the renovation—that is, after the tenant's architect gave the owner a certificate of substantial completion and a certificate of occupancy issued by the city. If the owner failed to pay the TIA, the tenant was entitled to stop paying rent. When the renovation was done, the tenant's architect gave the owner the certificate of substantial completion and other required documents, but no certificate of occupancy because the city didn't issue such certificates at the time. The owner refused to pay the TIA, so the tenant stopped paying rent. The owner then sued the tenant for violating the lease by failing to pay rent.

An Indiana appeals court ruled that the tenant hadn't violated the lease by failing to pay rent when it was entitled to the TIA. Since it was impossible for the tenant to get a certificate of occupancy, the renovation was substantially complete when the tenant had submitted the other required documents, the court said. The court sent the case back for further proceedings consistent with its ruling [Circuit City Stores, Inc. v. American National Ins. Co.].