By Robert Nislick
You are a Massachusetts commercial tenant. Your company leases space and pays a handsome rent to your Massachusetts commercial landlord. Unfortunately, the landlord utterly fails to maintain the leased premises. The condition of the space is so poor that it affects your ability to operate your business. What can you do?
One question a commercial tenant might ask is whether there is a right to withhold rent. The answer is no. In sharp contrast with the law governing residential tenancies, Massachusetts law recognizes no right of a commercial tenant to withhold rent.
Suppose that a commercial tenant stops paying rent because the conditions of the leased premises are defective. The landlord terminates the tenancy and commences a summary process action. In addition to attempting to assert a rent withholding defense, the commercial tenant also files counterclaims based on the bad conditions.
In this situation, a court is highly likely to dismiss the tenant’s counterclaims. “[T]he summary process statute precludes counterclaims in commercial actions”. Fafard v. Lincoln Pharmacy of Milford, Inc., 439 Mass. 512, 515 (2003). Moreover, a tenant’s argument that the landlord breached the lease “does not justify withholding rent”. See Fafard, 439 Mass. at 516.
What if the commercial tenant simply stops paying rent? Unless “the breach of contract has an extortionate quality”, “a failure to perform obligations under a written lease, even though deliberate and for reasons of self-interest, does not present an occasion for invocation of c. 93A remedies. Conventional damages achieve the goal of compensation, particularly because written leases often, as here, provide that the landlord may recover the legal expenses of pursuit, plus interest at the rate of twelve percent.” Atkinson v. Rosenthal, 33 Mass. App. Ct. 219, 226 (1992). This case generally stands for the idea, even if the tenant’s breach is intentional, the tenant will probably not be liable to the landlord under G. L. c. 93A, but still may have to pay the landlord’s attorney’s fees if the lease provides for it, in addition to the rent owed, and interest. Note that it is not recommended that any party, landlord or tenant, breach its contractual obligations.
If the landlord terminates the tenancy, will the tenant still have to pay rent? “It is well settled in the Commonwealth that when a landlord terminates a lease following the default of a tenant, the tenant is obligated to pay the rent due prior to the termination but has no obligation to pay any rent that accrues after the termination unless the lease otherwise provides.” 275 Washington Street Corp. v. Hudson River Int’l, LLC, 465 Mass. 16, 21 (2013).
The tenant will still most likely have financial obligations to the landlord even after the lease is terminated, such as “payments in an amount equal to the rent he had been paying”, or liquidated damages, rent acceleration, or indemnification. See 275 Washington Street Corp., 465 Mass. at 21-22.
Do any viable remedies exist for the commercial tenant? A commercial tenant may be able to terminate the lease based on the landlord’s failure to keep the building in proper repair.
In Wesson v. Leone Enters., Inc., 437 Mass. 708 (2002), the Court adopted the rule of mutually dependent covenants as contained in the Restatement (Second) of Property (Landlord and Tenant) § 7.1 (1977), such that:
“Except to the extent the parties to a lease validly agree otherwise, if the landlord fails to perform a valid promise contained in the lease to do, or to refrain from doing, something . . . and as a consequence thereof, the tenant is deprived of a significant inducement to the making of the lease, and if the landlord does not perform his promise within a reasonable period of time after being requested to do so, the tenant may (1) terminate the lease . . . .” Wesson, 437 Mass. at 720.
Another potential theory the tenant may pursue is based on constructive eviction. It is difficult, however, to prove constructive eviction in the commercial context. The tenant would need to prove that the defects made “the premises untenantable for the purposes for which they were used. See Wesson, 437 Mass. at 715.
A commercial landlord does have a statutory duty to correct unsafe conditions. “[T]he statutory duty of a landlord under G. L. c. 186, § 19, to exercise reasonable care to correct an unsafe condition described in a written notice from a tenant applies to commercial leases.” Bishop v. TES Realty Trust, 459 Mass. 9, 11 (2011).
G. L. c. 186, § 19, states in pertinent part:
“A landlord or lessor of any real estate . . . shall, within a reasonable time following receipt of a written notice from a tenant forwarded by registered or certified mail of an unsafe condition, not caused by the tenant . . . exercise reasonable care to correct the unsafe condition described in said notice . . . . The tenant . . . injured as a result of the failure to correct said unsafe condition within a reasonable time shall have a right of action in tort against the landlord or lessor for damages.”
Nevertheless, in Humphrey v. Byron, 447 Mass. 322 (2006), the Court rejected a request to impose a duty on commercial landlords “to exercise reasonable care to assure that others legitimately on the leased premises were not subject to an unreasonable risk of harm.” Humphrey v. Byron, 447 Mass. 322, 323 (2006).
About the author: Robert Nislick is a Massachusetts real estate lawyer. He can be reached at (508) 405-1238, or by e-mail at email@example.com.