The Covenant of Quiet Enjoyment And the “AIR” Standard Industrial Commercial Multi-Tenant Lease-Net
Tenant Tip Series *
What is quiet enjoyment? Do you know it may be part of your lease as a tenant?
Quiet enjoyment is more than relaxing on a warm afternoon. In the realm of real estate law, every lease includes an implied covenant that the tenant has the right to quiet possession of the leased premises during the term stated. It is important for both landlords and tenants to understand that this “covenant of quiet enjoyment” provides tenants with the right to possess and use the leased premises for the purposes contemplated by the Lease without interference from the landlord or persons acting on behalf of or through the landlord during the lease term.
Under applicable law, minor inconveniences and annoyances are not actionable breaches of the covenant of quiet enjoyment. In order to be actionable, a landlord’s conduct must substantially interfere with a tenant’s right to use and enjoy the leased premises for the purposes set forth in the lease. 1 As discussed below, the covenant of quiet enjoyment often serves as a tenant’s most fundamental protection in the event of a dispute with a landlord.
Comparing The Residential Lease versus Commercial Lease Treatment of Quiet Enjoyment
Although the covenant of quiet enjoyment is implied in every lease in California, a commercial lease is a matter of private contract between the landlord and tenant. Accordingly, “the covenant of quiet enjoyment can be modified or waived by the tenant in a commercial lease setting.” 2 In that regard, California courts have recognized that the covenant of quiet enjoyment (including the statutory covenant of quiet enjoyment established under Civil Code section 1927) is “subordinate to the intention of the parties” as set forth in a contract. 3
In accordance with the foregoing, courts have affirmed lease terms that exempted the landlord from liability arising out of conduct by the landlord 4 and conduct by the neighboring tenants 5 that would have otherwise breached the covenant of quiet enjoyment, and courts have also enforced lease terms that limited the tenant’s remedies for breach of the covenant of quiet enjoyment.4 These authorities clearly establish that the covenant of quiet enjoyment is subject to the intent of the parties as reflected in the express language of a lease.
Bearing in mind that the covenant of quiet enjoyment may be waived or modified in a commercial lease as set forth above, tenants and their attorneys should carefully review provisions relating to quiet use and possession in order to ensure that a tenant does not unknowingly waive the fundamental rights typically set forth therein. In regard to the oft-used American Industrial Real Estate Association (“AIR”) Standard Industrial/Commercial Multi-Tenant Lease-Net (referred to herein as the “AIR Form Lease”), Paragraph 38 establishes the tenant’s right to “Quiet Possession”. Paragraph 38 of the AIR Form Lease (2019 edition) specifically provides:
“Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions, and provisions on Lessee’s part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof.“
Watch for Conditions Placed on “Boilerplate” Rights
Although the above may seem to provide a “boilerplate” right to quiet possession, Paragraph 38 conditions tenant’s rights on the payment of rent and performance of all obligations under the AIR Form Lease. Significantly, Paragraph 38 does not include any notice provision or applicable cure period with which the landlord must comply prior to interfering with the tenant’s rights under the lease.
Consequently, the tenant may be denied its right to quiet possession without receiving applicable written notice or any opportunity to cure. This has the effect of rendering the notice and cure periods set forth elsewhere in the AIR Form Lease potentially meaningless.
In addition to Paragraph 38, Paragraph 8.8 of the AIR Form Lease may significantly affect a tenant’s rights and a landlord’s potential liability for a breach of the covenant of quiet enjoyment. Paragraph 8.8 provides, in pertinent part:
“Notwithstanding the negligence or breach of this Lease by Lessor or its agents, neither Lessor nor its agents shall be liable under any circumstances for… (ii) any damages arising from any act or neglect of any other tenant of Lessor or from the failure of Lessor or its agents to enforce the provisions of any other lease in the Project; or (iii) injury to Lessee’s business or for any loss of income or profit therefrom.“
Can Landlords Escape Liability?
Courts have held that the landlord exculpation clause in Paragraph 8.8 applies regardless of the theory of liability advanced by a tenant, and includes exculpation for liability arising out of an alleged breach of the covenant of quiet enjoyment. By its plain terms, the AIR Form Lease therefore allows a landlord to act negligently or commit a breach of the lease (including, but not limited to, a breach of the covenant of quiet enjoyment) and still escape liability under the shield of Paragraph 8.8.
In Fritelli , Inc., v. 350 North Canon Drive , LP (2011) 202 Cal. App. 4th 35, a tenant plaintiff sued a landlord defendant for, among other things, alleged breach of the covenant of quiet enjoyment arising out of renovations to a commercial property. In addressing the plaintiff’s claims, the Fritelli court evaluated the language in Paragraph 8.8 of the AIR Form Lease and its effect on a plaintiff’s alleged injuries and defendant’s potential liability therefor.
In that regard, the Fritelli court held that “the parties’ intent, as expressed in [Paragraph 8.8 of the lease] was to exempt the lessor from liability for breach of the lease and ordinary negligence.” Accordingly, the Fritelli court held that the exculpatory language in Paragraph 8.8 of the Lease “encompasses the facts alleged in [plaintiff’s] complaint” and agreed with the trial court that “the exemption in paragraph 8.8 bars [plaintiff’s] claims as a matter of law”, including the plaintiff’s claim for breach of the covenant of quiet enjoyment. Fritelli , Inc., v. 350 North Canon Drive , LP (2011) 202 Cal. App. 4th at 44.
The Need to Carefully Review Provisions addressing the Right to Quiet Enjoyment
In light of all the foregoing, the parties to a prospective lease and their counsel should carefully review the provisions of any commercial lease, including the AIR Form Lease, which address the tenant’s right to quiet enjoyment and the landlord’s liability (or exculpation of liability) for a breach thereof. As discussed herein, such provisions have the potential to dramatically affect the rights and obligations of the parties to a lease.
Please Note: This document does not constitute legal advice. Please consult an attorney for legal advice on what to do in a particular situation.
1Andrews v. Mobile Aire Estates (2005) 125 Cal.App. 4th 578
2Lee v. Placer Title Co. (1994) 28 Cal. App. 4th 506, 512; citing 6 Miller & Starr, Current Law of Cal. Real Estate (2d ed. 1989) § 18:88, pp. 214-215; Kushner v. Home Service Co., supra, 91 Cal.App. at p. 697
3Lee v. Placer Title Co. (1994) 28 Cal. App. 4th 506, 513
4Kushner v. Home Service Co. (1928) 91 Cal.App. 692, 696-698
5Conterno v. Brown (1968) 263 Cal.App.2d 135, 135–137
6Lee, supra, 28 Cal.App.4th at pp.512-513