The Experts: Law State court issues landlords two wins

By L. Steven Emmert, Inside Business – Hampton Roads, May 7, 2007

On April 20, the Supreme Court of Virginia decided two appeals involving landlord-tenant issues. While the two cases arise in very different contexts, both should be of interest to owners and managers of rental property.

In the field of commercial real estate, the court ruled in Select Management Resources v. The Runnymeade Corp. that a tenant does not have the right to make a dramatic change to the façade of its storefront in a shopping center without the landlord’s consent. With regard to residential leases, the court rejected in Isbell v. Commercial Investment Associates a tenant’s attempt to sue the landlord for defects in the rented premises.

Virginia law strongly protects the right of landlords and tenants to craft commercial leases as they see fit, and strongly enforces the parties’ obligations thereafter. The courts presume that commercial landlords and tenants each possess the degree of legal and business sophistication to protect their own interests, and that they have relatively equal bargaining power. (Experienced commercial realty professionals know that bargaining power is very much a function of the condition of the market, but the courts don’t undertake that analysis.)

The lease in the Select Management Resources case contained language (fairly typical of commercial leases) that prevented the tenant from making any alterations or improvements without the landlord’s consent. At the beginning of the lease term, this tenant repainted its storefront to its corporate colors – bright yellow, with red trim –without securing the landlord’s consent.

The Supreme Court ruled that while a fresh coat of paint normally is cosmetic, not structural, this paint job was different. Noting that every other storefront in the shopping center was the original uniform color, the court felt that this alteration bore “the mark of crass commercialism.” The court accordingly approved a directive that the tenant restore the façade to its original appearance.

In the residential lease case, the aspect of tort law is simple and straightforward – a tenant can’t sue his landlord for injuries sustained as a result of the condition of the premises. That’s because the tenant “takes the premises as he finds them,” and if he wants to live somewhere newer or in better repair, he can shop around.

But Virginia law looks a bit more carefully after the interests of some tenants. The Virginia Residential Landlord and Tenant Act applies to certain landlords owning more than 10 dwelling units, and provides additional rights for tenants of those landlords. This law is unapologetically pro-tenant, but the Supreme Court’s ruling in Isbell notes that those protections have limits.

The tenant argued that two of the act’s requirements – landlords must obey local building codes, and keep the premises in good condition – meant that he could, indeed, sue his landlord for injuries he sustained in a fall on a stairway. But the act doesn’t create such a right to sue, the court found, and did not specifically abrogate the landlord’s long-established immunity from this kind of liability.

Landlords and property managers will understandably applaud both of these rulings. The Select Management Resources case underscores the tenant’s obligation to ensure that the lease terms give him the flexibility he wants, or else get the landlord’s consent for all but the most minor changes to the premises. And the Isbell case closes the door on one tenant’s effort to circumvent Virginia’s long-standing rule against tenants’ tort suits against landlords.

L. Steven Emmert is chairman of the appellate practice subcommittee of the Virginia State Bar’s litigation section. His practice at Sykes, Bourdon, Ahern & Levy PC in Virginia Beach focuses on appellate advocacy in the state and federal courts. He authors the Web site “Virginia Appellate News & Analysis” at www.virginia-appeals.com.