Brief Fact Summary.
The Supreme Court of Pennsylvania ruled that a lease that fails to acknowledge any liability for either party when the entire building is destroyed without any fault to the tenant or the landlord relieves the contractual obligation of both parties.
Synopsis of Rule of Law.
When a landlord-tenant lease fails to acknowledge any liability toward either party regarding the obligation of risk of loss, where the building is destroyed at no fault of either party, then both the tenant and the landlord are relieved form their contractual obligation under the lease.
Kolea (Defendant) leased two adjoining lots in Philadelphia from Albert M. Greenfield & Co. (Plaintiff). Both parties agreed that Kolea would use the lots for a used car dealership. One of the lots was undeveloped while the other lot had a single structure. The lease failed to contain any provision regarding any party’s liability or responsibility for the destruction of the property. During the lease term, there was an accidental fire which cause the structure to burn down. As a result, the city barricaded the immediate area around the lot making it inaccessible. Without access, Kolea refused to pay rent. Greenfield filed suit for breach of lease and the trial court awarded $7,200. The appellate court affirmed the lower court and Kolea now appeals to this State’s Supreme Court.
When a lease fails to include a liability provision for either party in the event a building is destroyed, at no fault of either party, must both parties continue their obligation expressed in the lease?
No. The Supreme Court of Pennsylvania held that there are two exceptions to the traditional common law rule that the lower courts applied. The first exception is that when a tenant rents only a small space of a particular building and not the entire building itself, the tenant owes no obligation to continue to pay rent if the building is destroyed. The second exception, which applies in this case, is if then tenant expressed a particular use of the leased property in the lease, and the destruction of the building or leased premise is destroyed, rendering the intended use of the property impossible. Then, the tenant has no obligation to continue to pay rent since the tenant can no longer utilize the property in which he had intended.
Following such an analysis, if it is evident to the court that the parties bargained for the existence of a building, and no provision is made as to who bears the risk of loss if the building is destroyed, the court should relieve the parties of their respective obligations when the building no longer exists.View Full Point of Law
Roberts, J.- Seeks the adoption of the second restatement of property in which, if a non-manmade force destroys or changes the condition of the property and the landlord fails to fix the problem, only then should the tenant be relieved of liability. Roberts seeks to move away from the idea of the original intent stemming from the lease.
Nix, J. Simply agrees with the Court’s decision replacing the old rule.
The lower courts relied on an old common law rule which stated unless the lease itself contains a provision allocating risk of loss and obligations from either party, then the implied belief is the tenant must continue his obligation even if the building has been destroyed.