What Damages May a Tenant of Commercial Space Recover in Tennessee?
A couple of Tennessee cases lay out the kinds of damages a tenant of commercial space may be able to recover if the landlord breaches the lease by failing to make repairs or evicting the tenant without grounds.
Keep in mind that an eviction can be constructive. A constructive eviction occurs when the premises become untenantable. This often happens when landlords neglect repairs or make inadequate ones.
A tenant should be very cautious before concluding—without consulting experienced legal counsel—that a landlord’s failure to repair amounts to a constructive eviction that would permit lawful termination of the lease.
In the recent case of Pryority Partnership v. AMT Properties, LLC (Tenn. Ct. App. 2020), the landlord of a commercial building failed to repair a leaky roof on a warehouse rented to the plaintiff tenant.
The tenant was patient and gave the landlord several months to make the repairs, which the landlord had promised from the beginning of the lease. During that time, the tenant could not install several machines weighing several tons each.
After waiting several months with no repairs, the tenant terminated the lease. The trial court, affirmed by the Court of Appeals of Tennessee, found that the tenant had been constructively evicted and that the landlord had breached the lease by failing to repair the roof.
The trial court awarded the tenant nearly $200,000 in damages. These damages included rent paid to the landlord, renovation expenses, and relocation costs. The Court of Appeals affirmed this award, noting that a tenant may recover all damages resulting from a landlord’s breach that can be proven with reasonable accuracy.
Although the tenant in Pryority did not seek lost profits, the Court of Appeals pointed out that it could have, and that lost profits are recoverable in a breach of commercial lease case.
In The Hardison Law Firm, P.C. v. Howell (Tenn. Ct. App. 2003), a law firm rented Class A office space under a lease requiring the landlord to provide building security. The landlord failed to do so, and the tenant suffered theft losses on at least two occasions. The tenant terminated the lease and relocated.
The court found that the landlord had breached the lease. It awarded the tenant damages for:
$7,000 spent on a new phone system in the new space.
The cost of hiring security before relocation.
$84,000 in increased rent for the new space.
On appeal, the trial court’s award of all categories of damages was affirmed.
With respect to increased rent, the Court of Appeals held that the trial court had used the correct method to calculate damages. It compared the price per square foot in the defendant’s building with the price per square foot in the new space, applying that difference over the remaining lease term, starting from the date the tenant relocated.
Considering the many issues that can arise in commercial leases and the complexity of Tennessee law governing landlord and tenant duties, you should always consult experienced legal counsel before making decisions about problems with a commercial lease.