Sears wins claim against Upper Darby mall owner over condition of property

By Vimbai Chikomo | Jan 4, 2016

HARRISBURG - The state Superior Court recently ruled the owner of an Upper Darby mall allowed it to fall in such disrepair that it effectively evicted Sears, which alleged rodents, drug dealers and prostitutes could all be found on the premises.

In October, the court sided with Sears on a claim of constructive eviction based on years of neglect by a commercial landlord that resulted in the deterioration of the property to the point where it was allegedly unsuitable for use, leaving the tenant no other option but to vacate the premises.

“The Sears decision clarified and refined the legal standard by announcing it appropriate to consider instances of landlord interference collectively, based on their cumulative effect,” said attorney Scott W. Irmscher, of counsel at Buchanan Ingersoll & Rooney.

Irmscher further stated that the court’s decision marks a major development in Pennsylvania law concerning constructive eviction in a commercial-based context.

“In reaching this decision, the Superior Court widened the avenue of relief available to commercial tenants. The court further found a business’ commercial ‘attractiveness’ to be a relevant factor in the constructive eviction inquiry, protected by the tenant’s right to quiet enjoyment.”

Since 1988, Sears had leased a property from Monarch Inc. for its department store at a shopping center. Then, in 2005, 69th Street Retail Mall, LP acquired the property and became the new landlord. Because the lease was a below-market value rental, the landlord offered to buy out the remainder of Sears’ lease term and replace it with a more profitable tenant. Sears declined the 2006 offer.

According to the 2013 complaint filed in Delaware County, Sears alleged that the landlord retaliated by ignoring requests for repair and neglecting to provide routine maintenance, resulting in significant deterioration of the premises.

Sears also claimed that the landlord’s repeated failure to keep promises to repair the property led Sears to consider other remedies to restore the condition of the premises, but the landlord allegedly threatened Sears with default.

Eventually, Sears vacated the premises in May 2012.

The trial court documents revealed an array of defects and undesirable conditions at the time Sears abandoned the premises, such as: rodent infestation, water and sewer leaks, sewage backup, failure to maintain landscaping as agreed upon in the lease agreement, drainage problems in the garage resulting in deteriorating concrete falling out of the ceiling in the parking garage, deterioration of the store façade and insufficient lighting and electric systems in the parking deck.

In addition, homeless people were living in the parking garage, and illicit activity such as drug dealing and prostitution often took place in the ill-lit parking garage, a former Sears employee testified. He claimed the company paid out-of-pocket to improve lighting in the garage.

In the constructive eviction complaint, Sears claimed that the described conditions prevented the property from being suitable to function as a department store, and that it was forced to close due to the “cumulative effect over a number of years of promises made and promises never kept.”

The landlord argued that the alleged conditions in the parking areas and store did not prevent Sears from operating its business on a daily basis, and asserted that Sears was obligated to pay the balance of the lease. The landlord also argued that the closing of the Sears store was due to “the nationwide economic downturn of the Sears Corporation.”

The jury agreed with Sears and found that the landlord breached the lease by constructively evicting Sears, thereby suspending Sears’ obligation to pay rent.

On appeal, the state Superior Court held that “constructive eviction occurs when a lessor’s violation of a lessee’s entitlement to quiet enjoyment is so extreme as to interfere seriously with the lessee’s ability to use the leasehold as it was intended to be used, and the violation prompts the tenant to abandon the property within a reasonable amount of time."

Irmscher added that the court also provided guidance and counseled judicial sympathy based on the facts and circumstances of a particular case in the determination of whether a tenant vacated the premises within a “reasonable” amount of time.

One of the questions this case may raise is whether the Superior Court’s decision will affect more than commercial businesses. Irmscher believes it may be relevant to some landlords and tenants beyond the commercial context.

“The Sears decision was limited to the commercial context and likely has little precedential value to residential leaseholds. However, it may be relevant to municipalities or other government entities operating as landlords or tenants,” he said.

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