Is Enforcement of Lease Terms Constructive Eviction?

Q: A jury ruled in favor of a tenant that sued me for breaching its lease for space at my shopping center. The tenant argued that I had breached the lease by accepting late rent payments a few times but telling the tenant that it was in default for late rent payments it made a few months later, and demanding that the tenant pay back rent and fees in a lump sum. According to the tenant, this “constructively evicted” it and “disturbed its right to quiet enjoyment” of its space. If an appeals court determines that I didn’t breach the lease, could the tenant still prevail on its constructive eviction and quiet enjoyment claims?

A: In a recent Texas case, an appeals court said no. The appeals court determined that a tenant couldn’t prevail on constructive eviction and quiet enjoyment claims because they stemmed from several underlying breach-of-lease claims that were reversed in the owner’s favor. Because the owner hadn’t done anything wrong by trying to enforce its rights under the lease, it couldn’t have constructively evicted the tenant or disturbed its right to quiet enjoyment. Prevailing on those claims was dependent upon the owner actually breaching the lease.

In that case, a tenant and owner sued each other for breach of lease. The tenant claimed that the owner had no right to charge it for CAM and water charges in lump sums every few months. The tenant also balked at a sign fee that the owner attempted to charge it. And the tenant asserted that the owner’s pattern of accepting late rent payments meant that it had waived its right to enforce rent due dates. The tenant said that the alleged breaches on the owner’s part had constructively evicted it from its space and disturbed its right to quiet enjoyment. A jury ruled in favor of the tenant on all of its claims and determined that, although the tenant had breached its lease by moving out of the space early, the owner had breached the lease first. It awarded the tenant attorney’s fees of $15,000.

A Texas appeals court reversed the ruling, said that the tenant wasn’t entitled to attorney’s fees, and sent the case back to the lower court for a new trial on the owner’s claims against the tenant.

The appeals court made its decision after finding that there was no evidence that the owner had breached the lease by demanding that the tenant pay costs and fees which were all authorized under the terms of the lease. Because the landlord’s authorized conduct could not constitute a “substantial interference” with the tenant’s “use and enjoyment of the property,” the evidence was legally insufficient to support the tenant’s claims for breach of the warranty of quiet enjoyment and for constructive eviction [1221 Eldridge Road, Inc. v. Life Changing Ministries and Fellowship, Inc., January 2016].