Saturday, April 23, 2011

The Roof, The Roof, The Roof is on Fire...

The Georgia Court of Appeals reversed a Cobb County decision in favor of a commercial tenant, finding that the lease (1) required the tenant to replace the roof of the structure it rented and (2) did not allow early termination to the tenant as a result of the tenant being in default for its failure to replace the roof.  NW Parkway LLC v. Lemser, Case No. A10A1781, Decided March 24, 2011.  The Landlord ended up not only getting a new roof but locked up the tenant for five more years on the lease in a tough market.  The trial court had held that the tenant did not have to replace the roof, relying heavily on the Jacobi v. Timmers Chevrolet case, 164 Ga. App. 198 (1982). 

In Jacobi the Court of Appeals held that the repair and maintenance clauses of a lease did not require the tenant to replace a roof that was in the same condition it had been in when the lease commenced.  The Jacobi case had a lease with common repair and maintenance clauses but also a clause that the tenant should return the building in as good a condition as it got it.  In Jacobi the tenant had not actually occupied the building on the property, it had leased it as a parking lot. Thus, the tenant got the building needing a new roof and turned it back in the same condition. 

In this case, the lease contained a special stipulation that stated that the lessee "shall be responsible for and pay directly, on a timely basis, all expenses for the entire property and building, of any nature whatsoever during the term of this lease" except for the walls, slab and foundation.  The lease also stated that where the rest of the lease conflicted with it, the stipulation governed.  The lease went on to include common maintenance and repair provisions.  Apparently the roof needed replacing during the term but the tenant refused to pay for it.  The landlord got a TRO allowing entry to replace the roof.

The Court of Appeals noted that the Jacobi case did not include a clause like the special stipulation that trumped the maintenance and repair clause.  Reading the plain language of the stipulation, the Court determined that the roof replacement fell within the meaning of "all expenses" related to the building, and that the tenant had to pay for the roof replacement.  Going further the Court noted that the early termination clause required that the tenant not be in default in order to invoke it.  Because the tenant was in default for not paying for the roof, when the time for early termination came, it was not able to terminate the lease.  Therefore, the landlord got the new roof paid for by the tenant and five more years of the tenant being on the hook for the lease. 


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