Court Finds No Implied Term for Construction Completion in Lease

Facts: A tenant signed a lease for space for its restaurant. At the time the lease was signed, the owner was in the process of gutting and remodeling the premises, including installing an elevator. To install the elevator, the owner was required to draw up architectural plans, obtain permits, demolish portions of the building, order the elevator, and upgrade the electrical system. The elevator had to be completed before the tenant could obtain a restaurant liquor license. The lease provided that time was of the essence with respect to the performance of the respective obligations of the owner and the tenant; however, no date for the completion of the renovations to the building was specified in the lease.

The tenant couldn’t move into the space for several months, and eventually it sued the owner for failing to have the building ready, asserting that it had breached the lease. A trial court found that the owner breached the “time is of the essence” clause when it failed to have the building ready. The owner appealed.

Decision: A Florida appeals court reversed the lower court’s decision.

Reasoning: The tenant argued that although the lease contained no date for the completion of the owner’s work, the circumstances surrounding the execution of the lease led it to expect that the renovations would be completed within six months. It contended that the owner’s failure to fulfill that expectation was a breach of the lease.

For a court to consider the intention of the parties outside of the written contract, there must be some ambiguity in the contract, said the appeals court. But the tenant pointed to no ambiguity in the language of the lease which would require the court to find an implied term—that is, a specific date of completion. To the contrary, several provisions in the lease belie the fact that the completed construction was promised on a certain date, said the appeals court.

For example, one section stated: “Provided Landlord is able to obtain all necessary permits, Landlord shall install an elevator which is accessible from the Downstairs Space and the common area outside the Downstairs Space and is accessible from the Upstairs Space.” No dates regarding the permitting or installation of the elevator were specified in the lease. Rather, the lease granted the owner some leeway in installing the elevator as long as it “worked diligently” toward that goal. Specifically, one section stated that “the installation of the elevator must be completed before, and is necessary for tenant to obtain a restaurant liquor license. Therefore, Landlord agrees to work diligently to complete the installation of the elevator so as not to delay Tenant’s ability to apply for and obtain such liquor license.”

The appeals court found that the record didn’t support a finding that the owner breached the lease, so it reversed the judgment in favor of the tenant.

• 326-330 St. Armands Circle, LLC v. GEE22, LLC, April 2014