Tenant that Terminates Lease Early Must Repay Improvement Costs

What Happened: A lease required a medical tenant to reimburse the landlord for the costs of improvement made to the space if it terminated early. The tenant did terminate early, and the landlord billed it for $108,000 in improvement costs. The tenant refused to pay, contending that the landlord owed it money under a separate Professional Services Agreement (PSA) involving the parties that had been signed five years earlier.

Claiming that the PSA was totally irrelevant to this case, the landlord imposed a lien on the tenant’s medical equipment purporting to cover the costs of the unreimbursed improvements as provided for under the lease. But that didn’t stop the tenant from removing the equipment when it moved out. The landlord then sued the tenant for the improvement costs and civil theft.

Ruling: The Florida federal court rendered a mixed decision.

Reasoning: The landlord was entitled to recover the $108,000 in reimbursement costs that the tenant conceded it owed under the lease. The Lease Agreement and PSA were totally separate agreements, the court reasoned:

• The agreements were signed by different parties;
• They weren’t executed concurrently or even around the same time; and
• Neither agreement incorporated the other or contained any language suggesting an intention to make them interrelated or mutually dependent.

However, the court rejected the landlord’s civil theft claim, finding that it had no “possessory or ownership interest” in the tenant’s equipment and other property.

• Primo Orthopedics, LLC v. Hughston Orthopaedics, LLC, 2024 U.S. Dist. LEXIS 101731