Mold that Could’ve Been Discovered ≠ Breach of Implied Warranty of Suitability

What Happened: Upon taking possession of the premises she had just leased for use as a daycare center, a tenant detected a strange odor. It turned out to be mold, and the environmental consultant’s report showed that it was all over the walls and in the carpeting of the spaces designated for classroom use. The tenant told the landlord she was rescinding the lease. The landlord offered to let her out if she paid six months’ rent or forfeited the security deposit. The tenant chose none of the above and instead sued the landlord. The court granted the tenant summary judgment, finding that the landlord had breached the implied lease warranty that the property was suitable for the tenant’s purposes of running a daycare center.

Ruling: The Texas appeals court reversed the lower court’s ruling.

Reasoning: To prove breach of an implied warranty of suitability, a tenant must show that:

• There was a “latent” defect in the facilities at the inception of the lease;
• The facilities with the defect were vital for the tenant’s intended use; and
• The landlord failed to repair the defect.

The tenant had no problem with prongs 2 and 3 but was done in by prong 1. The problem was that while mold was certainly a defect, it wasn’t “latent"—that is, one that’s not discoverable by a “reasonably prudent inspection” of the premises at the inception of the lease. The mold in this case was discoverable, not only by an environmental consultant but by the tenant herself using her own sense of smell. The tenant’s consolation prize was that the court found that she had grounds to rescind the lease and was entitled to get her security deposit back.

• Casselsco, Inc. v. Alvi, 2021 Tex. App. LEXIS 6194, 2021 WL 3356849