Who is Responsible for Damage to Leased Commercial Real Estate?

When attempting to determine who is responsible for the damage to leased commercial real estate—and who must foot the bill for repairs—the first place to look is the lease. A commercial lease should spell out who is responsible for what types of repairs and maintenance. For example, it is common for a lease to provide that a tenant will keep the property is the same condition throughout the lease as it was when the lease began, excepting for normal wear and tear.

In this situation, the landlord would not have any obligation to make repairs during the lease. The tenant would be responsible for making any repairs. However, if the tenant is required to make repairs, while the landlord has the obligation to make major structural alterations, difficulties can arise when determining whether work performed is a “repair” or “alteration”.

This issue was discussed in the case of Friedman v. Le Noir, 73 Ariz. 333, 241 P.2d 779 (1952). In Friedman, the lessee had the obligation to maintain and keep in good repair the leased premises, not including major structural alterations. The tenants added vents and traps to the sewer line, and also replaced a portion of a gas line in order to comply with city specifications. The lessees attempted to sue the lessor for payment of these repairs.

The Arizona Supreme Court determined that this type of work was not a “repair” because it did not involved restoring to a sound state something which had been partially destroyed. Rather, the work involved replacing something with a new or different material. The vents and traps were added to the sewer pipes, and the gas pipe was larger and of a different material than the previous pipe. Therefore, the court reasoned that this work qualified as an alteration, not a repair.

However, the court did not believe that this work could be considered a “major structural alteration”. The court also stated that the obligation to maintain and repair the premises included the obligation to comply with a government order to make an alteration. The code provision was in effect when the lessees contracted to lease the premises, and they were obligated to bring the property up to code as part of the lease.

Chernoff Law handles business and real estate litigation matters throughout Arizona. Contact us to discuss your case with an experienced real estate attorney.