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Surrender, Surrender, But Don’t Give Yourself Away
Understanding a landlord’s damages for temporary repair costs at the end of a lease term By Christopher R. Mykytiak and David J. Haba Taft Stettinius & Hollister LLP
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eal property leases generally obligate tenants to surrender a leased premises vacant, broom clean and in good order, condition and repair – ordinary wear and tear and damage by casualty or condemnation excepted. What happens, however, when tenant has vacated the premises at the end of the lease term and the landlord insists that the tenant has not sufficiently surrendered the premises in accordance with the terms of the lease? First, let’s examine the “reasonable” standard under Ohio law that a landlord must abide by in order to sufficiently prove damages for repairs after the lease term. Then, given the potential ambiguity associated with the foregoing standard, we will also discuss how effective lease drafting can preemptively mitigate the risk for contention between landlords and tenants.
Which repair costs sought by landlords are ‘reasonable’?
Christopher Mykytiak
The essential inquiry under Ohio law as to the amount of damages a landlord is entitled to obtain from a tenant for temporary injury to real property is whether the damages sought by a landlord following the expiration or earlier termination of a real property lease are “reasonable” to compensate the landlord for property damage caused by the tenant. Martin v. Design Constr. Servs., Inc., 121 Ohio
David Haba
St.3d 66, 2009-Ohio-1, 902 N.E.2d 10, ¶ 19. The Ohio Supreme Court has stated that, to the extent a tenant has agreed to repair the premises, the proper measure of temporary damages to non-commercial real property is the reasonable cost of repairs, unless the cost of repairs exceeds the diminution in market value after the injury, in which case the diminution in value is the proper measure (Martin at ¶ 24.) Various lower courts have extended
the Martin holding to apply to commercial properties as well, and, in such context, either party may introduce evidence to support or refute claims of reasonableness, including evidence of the change in market value attributable to the temporary injury, provided that proof of diminution in value is not a required element of the injured party’s case (B & B Contrs. & Devs., Inc. v. Olsavsky Jaminet Architects, Inc., 2012-Ohio-5981, 984 N.E.2d 419, ¶ 78; citing the Eighth, Ninth and Tenth District Court of Appeals’ holdings finding the Martin case applicable to commercial cases such that a plaintiff’s failure to present evidence on diminution in value does not destroy its entire case).
End of term & surrender conditions under the lease
Given the potential for issues arising out of the ambiguous “reasonable” standard, both landlords and tenants should be careful to negotiate clear principles with respect to the tenant’s surrender of the premises.
Best practices when representing a landlord
Importantly, the obligations of a tenant to surrender the premises in good working order, condition and repair should be stated to survive the expiration or earlier termination of the lease. In addition, the landlord should set clear expectations that: (a) the tenant must remove various items, including, 62
Properties | November 2023