Florida Appeals Court Decision May Have Significant Ramifications for Commercial Leases

A recent court decision out of Florida’s Fifth District Court of Appeal is likely to have major ramifications for how commercial leases will be drafted in the future. The case, Genuinely Loving Childcare, LLC v. Bre Mariner Conway Crossings, LLC, was decided on January 13th, 2017 and involves the legal concept of frustration of purpose.

Understanding the Case

The Contract

Bre Marnier Conway Crossing (the landlord) and Genuinely Loving Childcare (the tenant) signed a five-year commercial lease for a 2800 square foot space located within an Orlando shopping center. The tenant rented the commercial property with the goal of operating a childcare center.

State Regulations

In Florida, if a childcare facility looks after more than five children, a state license is required. In order to obtain such a license from the Florida Department of Children and Families (DCF), the applying business must meet several different requirements. One of these requirements is that there must be an adequate amount of ‘outdoor play space’ per each child. Unsurprisingly, in heavily urban areas, outdoor play space can be very hard to come by. To address this issue, Florida allows childcare centers located within designated urban areas to apply for an exemption which allows them to substitute indoor play space for the typically required outdoor play space.

Genuinely Loving Childcare Was Denied an Urban Exemption

At the 2800 square foot location in the Orlando shopping center, no adequate outdoor play space was available. However, Genuinely Loving Childcare had access to plenty of indoor play space. The company tried to get an ‘urban area’ exemption from the DCF. However, their application was denied. This permitting issue occurred after the company has already signed a commercial lease with Bre Marnier Conway. The company then argued that it was no longer required to perform under the terms of the lease because of the:

• Impossibility of performance;
• Commercial impracticality;
• Frustration of purpose; and
• Commercial frustration.

All of these doctrines can be used as a defense against contract performance in certain circumstances.

The Landlord Sued for Breach of Contract

Brie Marnier Conway quickly brought a lawsuit for breach of the lease, seeking contract damages in the form of accelerated rent. The landlord argued that their tenant’s inability to secure the required licenses was a risk that was the responsibility of the tenant. Specifically, the landlord pointed to a general language provision within the commercial lease that pushes permit risk on the operating business.

Why the Appeals Court Agreed with the Tenant

The Fifth District Appeals Court reversed a decision made by the trial court, and ruled that the court had to re-examine whether or not the state child care center operating permit being denied was a reasonably foreseeable risk for the tenant. Most importantly, the appeals court noted that because the commercial lease did not explicitly address the DCF child care license, that the risk could not automatically be pushed onto the tenant with general, catch-all, contract language. This case has huge implications for how commercial leases should be drafted going forward. Landlords must get more specific with contract language to ensure that the risks are borne by the correct party.

Contact Our Office Today

At Pike & Lustig, LLP, our West Palm Beach landlord tenant litigations attorneys have extensive experience representing South Florida landlords in commercial lease disputes. To learn more about how we can help you, please do not hesitate to call our team today at 561-291-8298. Our firm is proud to announce that we have recently opened a new office in Miami.

Resource:

leagle.com/decision/In%20FLCO%2020170113175/GENUINELY%20LOVING%20CHILDCARE,%20LLC%20v.%20BRE%20MARINER%20CONWAY%20CROSSINGS,%20LLC