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The Evolution of Implied Warranties in Commercial Real Estate Lea
The Evolution of Implied Warranties in Commercial Real Estate Lea
1994
Recommended Citation
Paula C. Murray, The Evolution of Implied Warranties in Commercial Real Estate Leases, 28 U. Rich. L. Rev. 145 (1994).
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THE EVOLUTION OF IMPLIED WARRANTIES IN
COMMERCIAL REAL ESTATE LEASES
Paula C. Murray*
I. INTRODUCTION
145
146 UNIVERSITY OF RICHMOND LAW REVIEW [Vol. 28:145
1. Independent Covenants
9. See Rubens v. Hill, 72 N.E. 1127, 1130 (Ill. 1904) ("It is well settled that
where a covenant goes only to a part of the consideration on both sides, and the
breach of such covenant may be readily compensated for in damages, it is generally
considered independent.").
10. 1 AMERICAN LAW OF PROPERTY, supra note 3, § 3.11.
11. See, e.g., Stewart v. Childs Co., 92 A. 392 (N.J. 1914) (finding tenant's prom-
ise to pay rent independent of landlord's express covenant to repair premises);
McArdle v. Courson, 402 N.E.2d 292 (Ill. Ct. App. 1980) (holding that tenant could
not withhold rent and remain in possession even though landlord breached an express
covenant to repair).
12. See FRIEDMAN, supra note 5, § 1.1.
13. See Bettina B. Plevin, Note, Contract Principles and Leases of Realty, 50 B.U.
L. REv. 24, 26 (1970).
14. See, e.g., CAL. Cw. CODE § 792 (West 1954); ILL. REV. STAT. ch. 57, §§ 1-22
(1955).
148 UNIVERSITY OF RICHMOND LAW REVIEW [Vol. 28:145
15. See Jean C. Love, Landlord's Liability for Defective Premises: Caveat Lessee,
Negligence or Strict Liability, 1975 WIS. L. REV. 19, 32.
16. Miller v. Johnson, 6 D.C. (1 Mackey) 51 (1864).
17. Bell v. Tsintolas Realty Co., 430 F.2d 474, 481 (D.C. Cir. 1970).
18. See Benjamin J. Lambiotte, Comment, Defensively Pleading Commercial Land-
lords' Breaches in Summary Actions for Possession: A Retrospective and Proposal, 37
CATH. U. L. REV. 705, 710 (1988).
19. See John F. Hicks, The Contractual Nature of Real Property Leases, 24
BAYLOR L. REV. 443, 451 (1972).
20. See Mary Ann Glendon, The Transformation of American Landlord-Tenant
Law, 23 B.C. L. REv. 503, 510-11 (1982).
21. See Fred W. Bopp III, Note, The UnwarrantedImplication of a Warranty of
Fitness in Commercial Leases-An Alternative Approach, 41 VAND. L. REV. 1057, 1060
(1988).
19931 WARRANTIES IN REAL ESTATE LEASES 149
express covenant in the lease, the tenant was not excused from
payment of rent. This was truly caveat lessee. The operation of
the doctrine of independent covenants and caveat lessee doubled
the hardship of the residential tenant in particular because
there was no guarantee that the premises would be fit for hu-
man habitation. Even if there were such a guarantee, the ten-
ant still had the obligation to continue paying rent despite any
habitation problem.'
During this time, the courts justified this hardship by ratio-
nalizing that the tenant had the ability to inspect the building
before signing the lease and could put the premises into accept-
able condition himself.' Any latent defects could be remedied
by an express condition in the lease or the tenant could make
the repairs himself.' Today, these same arguments are ex-
pressed for the proposition that a commercial tenant does not
need any additional protection from unsafe or nonfunctional
premises. However, like today's typical residential tenant, the
commercial tenant may lack the expertise to conduct a diligent
inspection of the premises.
22. See, e.g., Truman v. Rodesch, 168 Ill. App. 304 (1912); Arbuckle Realty Trust
v. Rosson, 67 P.2d 444 (Okla. 1937).
23. See generally Jonathan M. Purver, Annotation, Modern Status of Rules as to
Existence of Implied Warranty of Habitability or Fitness for Use of Leased Premises,
40 A.L.R.3d 646, 650 (1971).
24. See John A. Marley, Note, Landlord-Tenant--Shoulda Warranty of Fitness be
Implied in Commercial Leases?, 13 RUTGERS L. J. 91, 94 (1981) (citing 1 AMERICAN
LAW OF PROPERTY, supra note 3, § 3.45).
25. See State Bank of Chicago v. Wheeler, 146 Ill. App. 568, 569 (1909).
UNIVERSITY OF RICHMOND LAW REVIEW [Vol. 28:145
3. Constructive Eviction
and the Subrogating Insurance Company, 18 FORUMI 683, 685 (1983); see, e.g., Young
v. Povich, 116 A. 26 (Me. 1922); Delamater v. Foreman, 239 N.W. 148 (Minn. 1931);
Morgenthau v. Ehrich, 136 N.Y.S. 140 (Sup. Ct. 1912). However, this exception was
not universally followed. See Fisher v. Lighthall, 15 D.C. (4 Mackey) 82 (1885);
Murray v. Albertson, 13 A. 394 (N.J. 1888); Franklin v. Brown, 23 N.E. 126 (N.Y.
1889).
50. Ingalls v. Hobbs, 31 N.E. 286, 286 (Mass. 1892).
51. J.D. Young Corp. v. McClintic, 26 S.W.2d 460, 462 (Tex. Civ. App. 1930),
rev'd on other grounds, 66 S.W.2d 676 (Tex. Comm. App. 1933). The lease was signed
before construction was completed and a roof leak caused damage to the tenant's
goods. The court held there was an implied warranty of fitness since the tenant could
not judge the suitability of the building at the time the lease was signed. Id. at 461-
62.
52. See Woolford v. Electric Appliances, Inc., 75 P.2d 112 (Cal. Dist. Ct. App.
1938) (landlord failed to provide refrigeration equipment for a meat market); Levitz
Furniture Co. v. Continental Equities, Inc., 411 So. 2d 221 (Fla. Dist. Ct. App.), peti-
tion denied, 419 So. 2d 1196 (Fla. 1982) (implied warranty that completed structure
will be suitable for lessee's intended use); Ingalls v. Hobbs, 31 N.E. at 286; Hardman
Estate v. McNair, 111 P. 1059 (Wash. 1910) (cafe and kitchen were not properly
ventilated).
53. See cases cited supra note 52.
54. Sunasack v. Morey, 63 N.E. 1039 (Ill. 1902) (holding that tenant has right to
rely on landlord's assurance that premises were in healthy condition); Pulaski Hous.
Auth. v. Smith, 282 S.W.2d 213 (Tenn. Ct. App. 1955) (landlord has duty not to
knowingly expose tenants to danger); but see Blake v. Dick, 38 P. 1072 (Mont. 1895).
55. See, e.g., Gamble-Robinson Co. v. Buzzard, 65 F.2d 950 (8th Cir. 1933); Taylor
154 UNIVERSITY OF RICHMOND LAW REVIEW [Vol. 28:145
ant could fit his claim into one of these exceptions or demon-
strate that he had been constructively evicted, he would not be
relieved of his obligation to pay rent."5
These exceptions to the doctrine of caveat lessee, while a
great step forward, did little to protect the tenant during the
term of the lease. The landlord had no duty to make repairs
after possession was transferred. The theory was that the ten-
ant accepted the risk of loss at the time she accepted posses-
sion.57 Once the tenant took possession of the property, the
landlord was not liable to the tenant or the tenant's invitees.58
This was an extremely harsh rule for tenants of improved prop-
erty because the obligation to pay rent continued even if the
improvement was destroyed or rendered unsuitable for the
tenant's purpose. 9 This result made sense as long as the
court's primary focus, when interpreting the lease, was the
land, not the structures.
By the late nineteenth century, some jurisdictions had adopt-
ed statutes which allowed a tenant to abandon the building and
no longer be liable for rent if the building was "untenantable,"
either as a result of being destroyed or damaged.0 An 1860
New York statute provided:
v. Leedy & Co., 412 So. 2d 763 (Ala. 1982); Daly v. Wise, 30 N.E. 837 (N.Y. 1892).
56. 1 AMERICAN LAW OF PROPERTY, supra note 3, § 3.45, at 267-69.
57. Glendon, supra note 20, at 516.
58. Marvin F. Milich, Protecting Commercial Landlords from Liability for Criminal
Acts of Third Parties, 15 REAL EST. L.J. 236, 237 (1987). The exception to this rule
was the innkeeper. The innkeeper possessed a "special relation" to the guests and
was compelled to keep the inn in good repair and reasonably safe. Id.
59. Stephen A. Siegal, Is the Modern Lease a Contract or Conveyance?-A Histor-
ical Inquiry, 52 J. URB. L. 649, 656 (1975).
60. Glendon, supra note 20, at 516.
1993] WARRANTIES IN REAL ESTATE LEASES 155
61. 1860 N.Y. Laws ch. 345, (quoted in Suydam v. Jackson, 54 N.Y. 450, 453
(1873)).
62. Id.
63. See, e.g., Meserole v. Hoyt, 55 N.E. 274 (N.Y. 1899) (house leaked and was
always damp to the extent tenant was stricken with malaria); Tallman v. Murphy, 24
N.E. 716 (N.Y. 1890) (tenants' rooms were at times filled with coal gas and smoke
which made them sick).
64. 1 TIFFANY, supra note 2, §§ 89, 91; see also, Glendon, supra note 20, at 516-
17.
65. See generally 1 TIFFANY, supra note 2, § 89.
66. See Sunasack v. Morley, 63 N.E. 1039 (Ill. 1902).
67. 1 TIFFANY, supra note 2, § 87.
156 UNIVERSITY OF RICHMOND LAW REVIEW [Vol. 28:145
Following World War II, the need for low cost, adequate
housing became readily apparent. In response to this need,
Congress passed the Housing Act of 1949. The goal of this Act
was to achieve "a decent home and a suitable living environ-
ment for every American family."' This statute, and other
Federal statutes that followed, required cities to create or up-
date ordinances and codes dealing with land use, sanitation,
and safety standards in order to qualify for federal subsidies.6 9
Almost immediately virtually all American cities began revising
and adopting housing codes. Unfortunately, these codes were
often unable to affect substantial changes in lower income hous-
ing. In many cities, the local government lacked the administra-
tive resources to rigorously enforce the codes, and if the codes
were enforced, courts would often only assess minimal fines.70
While these codes were the first significant step away from
caveat lessee, they alone were not enough.
During the mid-1960s, President Lyndon Johnson's Great
Society program made low cost legal services available to poor
tenants at little or no cost.7 ' As one commentator noted:
73. See, e.g., ALASKA STAT. §§ 34.03.100-.380 (1990); ARiz. REV. STAT. ANN. §§ 33-
1301 to -1381 (1980 & Supp. 1993); CONN. GEN. STAT. ANN. §§ 47a-1 to -20 (West
1978 & Supp. 1992); IOWA CODE ANN. §§ 562A.1-.37 (West 1992 & Supp. 1993);
MONT. CODE ANN. §§ 70-24-101 to -442 (1992); N.M. STAT. ANN. §§ 47-8-1 to -51
(Michie 1982 & Supp. 1993); OKLA. STAT. ANN. tit. 41, §§ 101-35 (West 1986 & Supp.
1993); V . CODE ANN. §§ 55.248.2 to .40 (Michie 1986 & Supp. 1993).
74. UNIFOmi RESIDENTIAL LANDLORD & TENANT ACT, 7B U.L.A. 430 (1993) [here-
inafter URLTAI; see, e.g., DEL. CODE ANN. tit. 25, §§ 5101-5112 (1989 & Supp. 1992);
HAW. REv. STAT. §§ 521-1 to -77 (1985 & Supp. 1992).
75. URLTA §§ 1.403(a)(1), 2.104(a)(2).
76. Id. at §§ 4.101-.102, 5.101.
77. See Green v. Superior Court, 517 P.2d 1168 (Cal. 1974); Breezewood Manage-
ment Co. v. Maltbie, 411 N.E.2d 670 (Ind. App. 1980); Detling v. Edelbrock, 671
S.W.2d 265 (Mo. 1984) (en banc); Pugh v. Holmes, 405 A.2d 897 (Pa. 1979).
78. See Hurst v. Field, 661 S.W.2d 393 (Ark. 1983) (no duty to repair unless pro-
vided in lease); Worden v. Ordway, 672 P.2d 1049 (Idaho 1983) (no implied warranty
where legislature had already acted and not provided for one); Zimmerman v. Moore,
441 N.E.2d 690 (Ind. App. 1982) (no implied warranty when non-merchant lessor
leases single family, used dwelling); Miles v. Shauntee, 664 S.W.2d 512 (Ky. 1983)
(no implied warranty without legislative action).
UNIVERSITY OF RICHMOND LAW REVIEW [Vol. 28:145
and held that the Milwaukee Housing Code did not give rise to
an implied warranty of habitability, and violations could not be
used as a defense to paying rent." These early cases, although
limited in scope, paved the way for the revolution in residential
lease law.
Lemle v. Breeden' was the first case to recognize the resi-
dential lease as a contract and hold that the landlord warrant-
ed by implication the habitability of the premises. The tenant
in Lemle sued to recover his deposit and rent paid after vacat-
ing the furnished house because of rat infestation.89 The court
in Lemle refused to apply the doctrine of constructive eviction
stating "[1]egal fictions and artificial exceptions to wooden rules
of property law aside, we hold that in the lease of a dwelling
house ... there is an implied warranty of habitability and fit-
ness for the use intended."99
While Lemle is the first case to clearly establish an implied
warranty of habitability, Javins, by far, is more widely cited as
the beginning of the erosion of the independent covenants doc-
trine and the principles of caveat lessee.9 In Javins, the court
held that "a warranty of habitability, measured by the
standards set out in the Housing Regulations for the District of
Columbia, is implied by operation of law into leases of urban
dwelling units covered by those Regulations."92 Nevertheless,
Javins opened the door to adoption of the implied warranty of
87. Posnauski v. Hood, 174 N.W.2d 528 (Wis. 1970). The court found that the
structure of the Code precluded private remedies and that it only authorized adminis-
trative enforcement. Id. at 532-33.
88. 462 P.2d 470 (Haw. 1969).
89. Id. at 472.
90. Id. at 474. The court also rejected the doctrine of caveat emptor stating.
[A]t one time [caveat emptor] may have had some basis in social practice
as well as in historical doctrine .... [but] in an urban society where the
vast majority of tenants do not reap the rent directly from the land but
bargain primarily for the right to enjoy the premises for living purpos-
es . .. common law conceptions of a lease and the tenant's liability for
rent are no longer viable.
Id. at 472-73.
91. See Green v. Superior Court, 517 P.2d 1168 (Cal. 1974); Jack Spring, Inc. v.
Little, 280 N.E.2d 208 (Ill. 1972); Foisy v. Wyman, 515 P.2d 160 (Wash. 1973).
92. Javins v. First Natl Realty Corp., 428 F.2d 1071, 1072-73 (D.C. Cir.), cert.
denied, 400 U.S. 925 (1970) (the tenants alleged more than 1500 violations of the
Housing Regulations of the District of Columbia).
UNIVERSITY OF RICHMOND LAW REVIEW [Vol. 28:145
107. See, e.g., McArdle v. Courson, 402 N.E.2d 292 (Ill. App. Ct. 1980) (refusing to
apply Javins to a commercial lease); Spialter v. Testa, 392 A.2d 1265 (N.J. Dist. Ct.
1978), affd, 408 A.2d 444 (N.J. Super. Ct. 1979) (per curiam) (defense of inhabitabili-
ty not available to commercial tenant).
108. Bopp, supra note 21, at 1067.
109. See Automobile Supply Co. v. Scene-in-Action Corp., 172 N.E. 35 (Ill. 1930);
Perkins v. Marsh, 37 P.2d 689 (Wash. 1934).
110. Michael J. Glazerman, Asbestos in Commercial Buildings: Obligations and Re-
sponsibilities of Landlords and Tenants, 22 REAL PROP. PROB. & TR. J. 661 (1987).
"Termination of the lease because of the mere presence of a dangerous substance,
such as asbestos, is not supportable under the present state of the law, but this sit-
uation could change if the warranty of habitability were extended to commercial leas-
es." Id. at 680 (citations omitted).
1993] WARRANTIES IN REAL ESTATE LEASES
111. See Stevan v. Brown, 458 A.2d 466 (Md. Ct. Spec. App. 1983) (adopting the
doctrine of equitable constructive eviction which allows the tenant to remain on pre-
mises while the court determines if constructive eviction occurred).
112. Collins v. Shanahan, 523 P.2d 999 (Colo. Ct. App. 1974) (tenant deducted
costs of repainting premises from rent; disallowed because covenants independent);
McArdle v. Courson, 402 N.E.2d 292 (Ill. App. Ct. 1975) (lessee not relieved of paying
rent even though lessor did not repair leaky roof); Murphy v. Texaco, Inc., 567 F.
Supp. 910 (N.D. IlM. 1983) (service station lessee obligated to pay rent even though
lessor did not perform any of its covenants).
113. See, e.g., Collins v. Shanahan, 523 P.2d at 1003 (covenants independent unless
clear intention to the contrary); McArdle v. Courson, 402 N.E.2d at 295 (covenant to
repair independent of covenant to pay rent).
114. See Service Oil Co. v. White, 542 P.2d 652 (Kan. 1975) (no implied warranty
in commercial leases).
115. See Yuan Kane Ing v. Levy, 326 N.E.2d 51 (111. App. Ct. 1975) (common law
principles govern commercial leases); Service Oil Co. v. White, 542 P.2d 652 (Kan.
1975) (no justification for extending implied warranties to commercial leases);
Kootman v. Kaye, 744 S.W.2d 898 (Mo. Ct. App. 1988) (no implied warranty of habit-
ability in non-residential lease); Golub v. Colby, 419 A.2d 397 (N.H. 1980) (no implied
warranty of habitability in a commercial setting).
116. ALAsKA STAT. § 34.03.100 (1988); ARIz. REV. STAT. ANN. § 33-1324 (1990);
CAL. Civ. CODE §§ 1941, 1941.1 (West 1985); CONN. GEN. STAT. ANN. § 47a-7 (West
164 UNIVERSITY OF RICHMOND LAW REVIEW [Vol. 28:145
1978 & Supp. 1992); DEL. CODE ANN. tit. 25, § 5305 (1974); FLA. STAT. ANN. § 83.51
(West 1987); HAW. REV. STAT. § 521-42 (1985); IDAHO CODE § 6-320 (1990); IOWA
CODE ANN. § 562A.15 (West 1992); KAN. STAT. ANN. § 58-2553 (1983); KY. REV. STAT.
ANN. § 383.595 (Michie/Bobbs-Merrill Supp. 1992); ME. REV. STAT. ANN. tit. 14, §
6021 (West 1964 & Supp. 1992); MD. CODE ANN., REAL PROP. § 8-211 (1988); MASS.
ANN. LAWS ch. 111, § 127A (Law. Co-op. 1985 & Supp. 1993); MICH. COMP. LAWS §
554.139 (1981); MINN. STAT. ANN. § 504.18 (West Supp. 1993); Mo. REV. STAT. §§
441.500, 441.510 (1986); MONT. CODE ANN. § 70-24-303 (1992); NEB. REV. STAT. § 76-
1419 (1990); NEV. REV. STAT. § 118A.290 (1993); N.J. STAT. ANN. § 2A-42-88 (West
1987); N.M. STAT. ANN. § 47-8-20 (Michie 1993); N.Y. MuLT. DWELL. LAW §§ 301,
302(1)(b) (McKinney 1977 & Supp. 1992); N.Y. REAL PROP. LAW § 235-b (McKinney
1988 & Supp. 1992); N.C. GEN STAT. § 42-42 (1990); N.D. CENT. CODE § 47-16-13.1
(1960); OHIO REV. CODE ANN. § 5321.04 (Anderson Supp. 1992); OKLA. STAT. ANN. tit.
41, § 118 (West 1986); OR. REV. STAT. § 91.770 (1990); PA. STAT. ANN. tit. 35, §
1700-1 (1993); R.I. GEN. LAvs §§ 34-18-16, 45-24-3-6 (1984 & Supp. 1992); S.D. CODI-
FIED LAws ANN. §§ 43-32-8, -9 (1983); TENN. CODE ANN. § 66-28-304 (1982); TEX
PROP. CODE ANN. § 92-052 (West 1984 & Supp. 1992); VA. CODE ANN. § 55-248.13
(Michie 1986 & Supp. 1993); WASH. REV. CODE ANN. § 59.18.060 (West Supp. 1993);
W. VA. CODE § 37-6-30 (1985); Wis. STAT. § 704.07 (Supp. 1992).
117. 251 A.2d 268 (N.J. 1969).
118. See supra notes 90-106 and accompanying text.
119. Reste, 251 A.2d at 271.
120. Id.
1993] WARRANTIES IN REAL ESTATE LEASES 165
Law Div. 1975) (finding that Reste adopted the implied warranty of habitability in
commercial leases); Van Ness Indus., Inc. v. Claremont Painting & Decorating, 324
A.2d 102 (N.J. Super. Ct. Ch. Div. 1974) (implied warranty of fitness in residential
but not commercial leases); Olson v. Scholes, 563 P.2d 1275 (Wash. Ct. App. 1977)
(Reste implied a warranty of habitability in commercial leases, but Washington court
refused to follow).
129. 446 N.Y.S.2d.844 (Civ. Ct. 1981). The court also stated that "[tihe nature of
the [implied] warranty would . . . differ from that of a residential lease warranty and
would depend on the relationship of the parties, the nature of the tenant's business
and the nature of the commercial premises involved." Id. at 845.
130. Id. at 845. See also Park West Management Corp. v. Mitchell, 391 N.E.2d
1288 (N.Y. Civ. Ct.), cert. denied, 444 U.S. 992 (1979) (implying warranty of
habitability in residential leases and making tenant's obligation to pay rent dependent
on landlord's compliance with warranty).
131. Randall Co. v. Alan Cobel Photography, 465 N.Y.S.2d 489 (Civ. Ct. 1983).
132. See also Middletown Plaza Assoc. v. Dora Dale of Middletown, Inc., 621 F.
Supp. 1163 (D. Conn. 1985) (applying New York law to commercial leases, con-
structive eviction necessary for defense to suit for nonpayment of rent); Kachian v.
Aronson, 475 N.Y.S.2d 214 (Civ Ct. 1984) (no implied warranty of habitability in
commercial leases).
1993] WARRANTIES IN REAL ESTATE LEASES
[Ilt seems safe to say that New York remains rooted firmly
in traditional, common law ground. This state has not
shown signs of accepting the notion that smaller, less so-
phisticated business tenants are suitable candidates for at
least some of the current residential remedies. Rather, with
one glaring exception, the New York lower court decisions
firmly embrace the time-tested doctrines of independence of
covenants and caveat emptor."'
141. Id. at 625. The court, however, did not expressly preclude the commercial ten-
ant from raising breach of the implied warranty of habitability in an unlawful detain-
er action. Id. at 626. See generally Michael P. McCloskey, Note, Commercial Leases:
Behind the Green Door, 12 PAC. L.J. 1067 (1981).
142. 229 Cal. Rptr. 383 (Ct. App. 1986).
143. Id. at 388-89.
144. Id.
145. 747 S.W.2d 373 (Tex. 1988).
146. Id. at 377.
1993] WARRANTIES IN REAL ESTATE LEASES
147. Id.
148. Id. at 374-75.
149. Id at 375.
150. Id.
151. Id.; see also Cottrell v. Carrillon Assoc., 646 S.W.2d 491 (Tex. Ct. App. 1982)
(no writ); Ravkind v. Jones Apothecary, Inc., 439 S.W.2d 470 (Tex. Ct. App. 1969)
(writ refd n.r.e.).
152. Davidow, 747 S.W.2d at 376.
153. Id.
170 UNIVERSITY OF RICHMOND LAW REVIEW [Vol. 28:145
C. Policy Considerations
IV. CONCLUSION
[implied] warranty would force the issue to be more conspicuous to the lessee and
make him more aware of the potential liabilities he will be under by entering into
the lease." Id.
19931 WARRANTIES IN REAL ESTATE LEASES 177