Implied Warranties in Commercial Leases

Courts in some jurisdictions have extended the implied warranty of habitability to commercial leases to find an implied warranty of fitness for intended purpose.[1] Some commentators find the implied warranty of fitness analogous to the implied warranty of merchantability in the Uniform Commercial Code.[2]

No Washington decision to date has found an implied warranty in commercial leases, but dicta in one opinion leaves the door open.[3]

In Olson the tenant rented dog kennels and two residences.  The court declined to apply the Foisy implied warranty of habitability.[4]

The court considered an earlier New Jersey opinion finding an implied warranty in a commercial lease and distinguished the facts of that case by noting that it was for an office space and thus for human occupancy and that the defects were latent defects in common areas and unlikely to be discovered by the tenant.

In contrast, the Olson tenant could see the defects and problems of the rented kennels, accepted the leased premises in “as is” condition, and had operated the kennels for over two years before the falling out between the parties occurred.

The Olson court noted that the implied warranty of habitability had not been extended to commercial leases “in the usual situation” and left the door open to the possibility of an implied warranty.

It may be that a situation will arise where such a warranty should be imposed in a commercial lease, but we decline to do so in this case.[5]

Although there is apparently no general, non-waivable implied warranty in commercial tenancies in Washington courts might find an implied warranty with appropriate facts under contract law concepts such fitness for intended purpose and Hadley v. Baxendale contemplation of parties analysis.

[1] See The Implied Warranty in Commercial Leases.

[2] See Schonshinski, American Law of Landlord and Tenant §3:29, n.68 and n.72.

[3] Olson v. Scholes, 17 Wash. App. 383, 563 P.2d 1275, 1281 (1977).

[4] Foisy v. Wyman, 83 Wn.2d 22, 515 P.2d 160 (1973).

[5] Olson at 392.

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