Defaulting Tenant Can’t Stop Owner from Making Alterations

Facts: An owner sued his commercial tenant in a Pennsylvania civil court, and the court awarded the owner nearly $3.3 million in damages. There was no dispute regarding the tenant’s default and breach of the agreement. However, the tenant appealed, claiming that the owner breached the covenant of good faith and fair dealing by retaking the rented storage space to correct a building code violation and obstructing the re-letting of the property. The owner cross-appealed and challenged the civil court’s decision allowing the tenant to join several of his partners to the case. The partners had joined the partnership after the lease at issue was executed.

Decision: A Pennsylvania superior court reversed, in part, the trial court’s judgment imposing individual liability against the general partners, and returned the case to the lower court for a recalculation of the award of counsel fees. The court upheld the trial court’s decision in all other respects.

Reasoning: The court ruled that once the tenants defaulted on the lease, the owner was entitled to enter the premises and make any alterations. The court further held that, since the tenants had defaulted and abandoned the lease space, the tenants didn’t have any possession that could be obstructed or disturbed. The court, however, did find error with the trial court’s prejudgment interest award. The court explained that the lease lacked an acceleration clause and, because there was no clear agreement for counsel fees in the lease, the award of counsel fees to the owner was improper. Finally, the court said that even though the tenant’s partners had joined the partnership after the execution of the lease, they could be joined to the case as it affected the partnership firm.

• Trizechahn Gateway, LLC v Titus, September 2007.

Editor’s Note: A tenant who has breached the lease cannot stop the owner from entering the premises and making alterations, or claim obstruction of the property.