Material Defect

Hello landlords and tenants I’m going to discuss “material defect” and their significance in commercial real estate leasing. My name is Jenna Zebrowski and I am the attorney behind LawByJZ.com. It’s material defect is wrong with the space that affects its value to you as the tenant.

The material defect might or might be known or visible, and landlords don’t want to fix anything they don’t have to.  So it’s important to make sure, tenant, that you’re not waiving any legal rights or remedies if you find out later on that there’s a big important problem with your space and not just a minor nuisance. You should know what you’re getting into before you get into it!

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Commercial Real Estate Case Study

Material Defect: It’s Not Just the Little Things

Gretchen and her husband had grown their business from a single box truck to a whole fleet of vehicles, of various sizes,and drivers. They needed to find a larger warehouse where they could store the trucks and perform maintenance, with enough loading bays large enough for them to park, load and unload the biggest vehicles. 

They signed a lease with a landlord that was willing to remodel his existing warehouse location and provide the right amount and size of truck bays that they needed to expand their operations. They agreed on the number and size and other specifications for the truck bays and the cost that each party would contribute to the remodel, and even drew up contingency plans for further expansion in case they needed it, based on their business performance.

The landlord did the construction and informed them when he was done.  They started moving their operations over and switched the trucks over to their new locations.  The first time one of the drivers tried to pull his large truck into one of the newly built truck bays, they discovered a terrible problem.  The bays were built wrong and couldn’t support the largest size of trucks. 

They rushed back to the landlord, who said that it was their problem, they had started their operations and that means accepting the work he had done. They rushed back to the attorney who negotiated the lease for them, and discovered, actually, it was the landlord’s problem.  It was material defect, a large enough problem that it impeded their business operations.  The landlord was responsible for any material defects it created, which included not putting in the right truck bays. 

The landlord wasn’t cooperative, so Gretchen and her husband did the work themselves, making sure it was done correctly, and deducted the amount due from the rent they owed the landlord, which was allowed under the lease.  They were able to get exactly what they wanted and didn’t have to confront an uncooperative landlord.