Does the Failure to Provide Adequate Parking Constitute a Material Breach of a Commercial Lease Agreement?

Adequate parking is essential to most businesses.  Sufficient parking is needed for a business’s employees, customers or vendors.  Most commercial lease agreements will address parking or will address common areas, which may include parking.  Depending on a tenant’s business, adequate parking may be a material term of the commercial lease agreement.

Both commercial landlords and tenants must consider the parking needed for a tenant’s business operations prior to execution of a commercial lease agreement.  If a certain amount of parking is essential to the operation of a tenant’s business, then the lease agreement should specify the amount and location of parking available to the tenant.  This will ensure that both parties are fully aware of their rights and obligations regarding parking.  Without a provision in the lease agreement addressing parking, there may be a grey area that results in costly litigation for both parties.

While Florida case law appears to be scarce on whether the failure to provide adequate parking constitutes a material breach of a lease agreement, the answer will most likely depend on the facts of each situation and the language and representations made in the lease agreement.

Parking provisions constituting a material term of the commercial lease agreement

A prior material breach of a contract is a breach by one party that goes to the essence of the contract and discharges the non-breaching party from further contractual duty to perform.  See, e.g., Beefy Trail, Inc. v. Beefy King Int’l, Inc., 267 So. 2d 853, 857 (Fla. 4th DCA 1972); Atlanta Jet v. Liberty Aircraft Servs., LLC, 866 So. 2d 148, 150 (Fla. 4th DCA 2004);

The key for a prior material breach is that the breach goes to the essence of the contract.  A failure to perform a minor part of a contract does not constitute a material breach.  Beefy Trail, Inc., 267 So. 2d at 857; Covelli Family, L.P. v. ABG5, LLC, 977 So. 2d 749, 752 (Fla. 4th DCA 2008) (finding a delay in procuring a repair estimate to constitute only a technical breach but not a material breach).

Whether adequate parking constitutes a material term of a lease agreement will likely depend on the nature of a tenant’s business and the representations made in the lease agreement.  However, in most retail or service industries, adequate parking is essential to the tenant’s business and is likely a material term of the lease agreement.  The failure to provide adequate parking would potentially give rise to a material breach of the agreement and discharge of further obligations under the lease agreement.  Again, the obligations will largely depend on the nature of the tenant’s business and the obligations set forth in the written lease agreement.

For example, in Morton’s of Chicago/Miami, LLC v. 1200 Castle 100-A, Inc., No. 13-23366, 2014 WL 11944280 (S.D. Fla., April 14, 2014), a landlord and tenant entered into a lease agreement that included multiple provisions that entitled the tenant to free parking in a neighboring parking garage.  The tenant was entitled to 35 parking spaces in the parking garage at no additional cost to the tenant.  The tenant received free parking for fifteen years until the subsequent owner of the parking garage began charging for use of the parking garage.  The tenant informed the landlord that the owner of the parking garage refused to provide free parking and the landlord did not take any action to resolve the issue.  In response, the tenant filed a lawsuit in federal court seeking, among other things, damages for breach of the lease agreement requiring the landlord to provide free parking.  The district court found that the landlord was obligated pursuant to the lease agreement to provide free parking.  As such, by failing to continue to provide free parking, the landlord materially breached the lease agreement.  As a result of the material breach, the tenant was entitled to damages.

Representations regarding adequate parking

Landlords and their leasing representatives need to be careful what representations they make to potential tenants.  The case of Thor Bear, Inc. v. Crocker Mizner Park, Inc., 648 So. 2d 168 (Fla. 4th DCA 1994), provides an example of where a landlord was found liable for damages based upon misrepresentations made by the landlord’s leasing representative about the parking available to a tenant.

In Thor Bear, Inc., a tenant entered into a commercial lease agreement with a landlord for space in a shopping complex for the tenant to operate a retail video store.  The store operated for a few months and then closed.  The tenant claimed that the store’s failure was due to inadequate parking facilities which caused a traffic jam and thereby discouraged and prevented customers from visiting the tenant’s store.

During a jury trial, the tenant’s representative testified that the tenant had negotiated with the landlord’s leasing representative and the tenant had explained to the landlord’s leasing representative that the tenant’s store required quick ingress and egress and ample parking.  The landlord’s leasing representative acknowledged this need of the tenant and informed the tenant that the landlord could accommodate the tenant’s need.  The leasing representative also informed the tenant that additional paved parking would be built nearby.

Additional parking was not built nearby and the tenant claimed inadequate parking was the reason for the failure of its business.  The jury returned a verdict in favor of the tenant and found that the landlord had fraudulently misrepresented the parking situation and had induced the tenant to enter into the lease agreement based upon the representation that there would be sufficient parking for the tenant’s business.  The jury awarded damages to the tenant.

While Thor Bear presents a cautionary tale to landlords and their leasing representatives, Thor Bear is likely the exception rather than the rule because commercial lease agreements should include a non-reliance clause prohibiting parties from relying upon prior statements or representations not contained in the lease agreement.  The Thor Bear opinion does not address whether there was a non-reliance clause in the lease agreement.

Lease Agreements should sufficiently address parking obligations

Landlords need to consider the language in their lease agreements and the parking obligations imposed on the landlord to ensure that the landlord can comply with those obligations.  If the landlord fails to comply with those obligations, such failure may give rise to a material breach of the lease agreement and grounds for the tenant to terminate the lease agreement and potentially sue the landlord for damages.  For example, if a landlord knows that it can only allocate ten parking spaces to a certain tenant, the lease agreement should say so and should not include language that would indicate that more parking is available.  The lease agreement should also state that the tenant has reviewed the parking available to the tenant and that the tenant agrees that the parking available is sufficient for the tenant’s business operations.

On the other hand, tenants need to consider the language of the lease agreement and make sure that the lease agreement affords the tenant sufficient parking for its business operations.  Using the above examples, if the lease agreement states that the tenant is only afforded a certain number of parking spaces, then the tenant needs to make sure that the limited parking will be sufficient for its current and future business operations.  Also, it is wise for all tenants to make sure they have observed the leased space at all times of the day prior to entering into the lease agreement so that the tenant feels comfortable that there will be sufficient parking.  A tenant’s failure to perform due diligence before entering into the lease agreement may give rise to a claim by the landlord that the parking situation was open and obvious and accepted by the tenant.

Conclusion

Understanding the parking available to a tenant is important for both commercial landlords and commercial tenants.  Both parties are in business to make money.  The failure of the parties to understand and address the amount of parking available to a tenant can result in a dysfunctional relationship between the landlord and tenant and potentially give rise to the termination of the lease agreement.