Opinion ID: 1374499
Heading Depth: 1
Heading Rank: 1

Heading: the lessee's obligation to restore the premises to their original condition

Text: The first issue we must address is if the trial court correctly construed the lease provision concerning Arden's obligation to restore the premises in their original condition. The third sentence of paragraph 11 states, In case any alterations are made in said premises by Lessee, it is agreed that on the termination or expiration of this lease the said Lessee shall restore and repair the demised premises in their original condition, should the Lessor so desire ... Arden contends the trial court erred in its interpretation of this provision and its determination of Arden's obligations thereunder. First, Arden argues that the trial court erred in holding Arden liable for its failure to remove equipment which it had originally installed in the building when it was first constructed. Arden contends that, under the lease, this equipment became part of the building's original condition, and the trial court should not have construed its obligation to restore the premises to their original condition to include removal of such equipment. We conclude that the lease indicates that the original condition of the building included equipment Arden installed pursuant to the lease when the building was first constructed and, therefore, Arden is not liable for failing to remove it. Under paragraph 27, Arden was required to install equipment in the building [a]s a part consideration of making this lease. Generally, where a lease requires a tenant to install articles on the premises as consideration for the lease, the tenant may not remove them. 2 M. Friedman, Leases § 24.2 (2d ed. 1983). This indicates that Arden had no right to remove the equipment it initially installed under paragraph 27 and therefore that such equipment became part of the premises. Additionally, it is reasonable to interpret original condition to mean the condition of the premises once both parties' construction and installation obligations under paragraph 27 were completed. Finally, when paragraphs 11 and 27 are compared, it appears that the lease distinguishes between items that the lessee initially installed in the premises and subsequent installations. While paragraph 27 concerns installations which Arden was required to make at the time of the construction of the building, paragraph 11 deals with additional features which Arden could incorporate later at its discretion. The second sentence of paragraph 11 provides that [i]n case Lessee shall put in or upon said premises certain items, it shall have the right to remove them upon the termination of the lease. This sentence appears to refer to the disposition of items which the lessee added to the premises at its discretion rather than items it was required to install initially under paragraph 27. The third sentence of paragraph 11 states, In case any alterations are made, the lessor may require the lessee to return the demised premises in their original condition. This introductory clause must refer to modifications which Arden might choose to make after it completed the required initial installations pursuant to paragraph 27. It would be odd to construe alterations as including items which the lease required Arden to install. It is more sensible to interpret alterations to signify changes made after the completion of the facility contemplated in paragraph 27. If alterations are changes made after the initial installations, the original condition must mean the premises including the initial installations. [1] Thus, the trial court incorrectly determined Arden's general obligations under the lease provision for restoration of the premises to their original condition. Considering the lease as a whole and the plain language of the third sentence of paragraph 11, the following construction is reasonable. Where Arden made changes in the premises after the installations it made initially under paragraph 27, Fisher could require Arden to restore those altered aspects of the premises to their original condition. The original condition is the configuration of the premises at the completion of the construction contemplated by paragraph 27; in other words, the original condition includes the installations initially made by Arden pursuant to the lease. Accordingly, Arden was only required to remove features it had added above and beyond the original installations and the trial court erred in requiring Arden to pay the cost of removing equipment and other features which it had initially installed in the premises. Arden also contends that the trial court misconstrued the meaning of the phrase original condition in the lease as it is applied to the garage portion of the premises. The trial court essentially concluded that Arden was required to restore the garage to its condition in the 1920's, when it was built. Arden argues, however, that since Fisher did not lease the garage to Arden until 1960, Arden should not be required to restore it to its 1920's condition. The lease itself does not clearly indicate what original condition means with respect to the garage. The 1960 agreement in which Fisher leased the garage to Arden merely states that the garage is added to the leased premises and made subject to all of the covenants and conditions of the original lease. Fisher argues that since this agreement provided that the garage was subject to the covenants of the original lease, and the original condition of the premises under the original lease was the 1920's condition, Arden was required to restore the garage to its 1920's condition. However, the fact that the garage was subject to the covenants in the original lease only means that Fisher could require Arden to restore the garage to its original condition; it does not indicate if that condition is the 1920's or 1960 condition. The role of the court is to determine the mutual intentions of the contracting parties according to the reasonable meaning of their words and acts. Dwelley v. Chesterfield, 88 Wn.2d 331, 560 P.2d 353 (1977). When a provision is subject to two possible constructions, one of which would make the contract unreasonable and imprudent and the other of which would make it reasonable and just, we will adopt the latter interpretation. Dickson v. United States Fid. & Guar. Co., 77 Wn.2d 785, 790, 466 P.2d 515 (1970). When the parties entered into the 1960 agreement leasing the garage, they could not reasonably have intended that when the lease terminated, Fisher could require Arden to restore the garage to its condition some 40 years before they made that agreement. It would be peculiar to require a lessee to return a facility to a condition which existed long before that facility was leased. In the absence of any language specifically indicating an intent to impose such an obligation, we will not infer it. The more reasonable construction is that the original condition of the garage was its condition in 1960 when the lease term began. Thus, Arden was required to restore the garage to its 1960 condition, and the trial court erred in awarding Fisher damages for the cost of restoring the garage to its 1920's condition.