Landlord-Tenant Dispute Arbitration Testimony

Project Overview

Late in 2014, PFCS was hired by the lawyer for a grocery store (the tenant) involved in a landlord-tenant dispute. The tenant decided to not renew the lease after occupying the property for 20 years. The owner (landlord), who had purchased the property 10 years before, wanted $200,000 from the tenant for differed maintenance costs he claimed the store was responsible for, according to the terms of the lease. The tenant claimed that they only needed to pay the landlord $20,000. 

By the time of the arbitration in 2015, the owners estimated repair costs and the claim had ballooned to $600,000, but PFCS estimated only $40,000 in work was required.

Our Approach

PFCS Construction Claims Analysis Method 

  1. Collect: We organized and analyzed all applicable documents and information. 
  2. Plan and budget our work.
  3. Issues/Allegations: We made a Sensible List that served as an outline of the analysis. 
  4. Investigation: We applied PFCS Building Performance Analysis (BPA) Process.
  5. Analysis: We executed an issue-by-issue inquiry of all available information and composed a construction cost estimate.
  6. Conclusions: We documented our conclusions for each issue in a comprehensive report.
  7. Present: We delivered expert deposition testimony and arbitration testimony.

Pete Fowler's Testimony

From Report Section 6: Conclusions

XXX CONSULTING GROUP 12/1/2014 PRELIMINARY COST OF REPAIR ESTIMATE: 

  • Most or all of the estimated costs should have already been incurred, or they were not necessary. Therefore, generally the estimated figures should be considered superfluous. 
  • For the items in sections 1 and 3 where XXX estimated the costs (rather than gathered invoices for expenses incurred as was the case for the section 2 items), these costs should be considered a rough and conservative budget. That is, when the scope is vague, XXX's assumed costs are generally high. 
  • The document lacks adequate scope definition to be considered a reliable construction cost estimate. The document typically does not include specific reference to location, quantity or method of performing the work being estimated. This is another reason the estimated costs in section 1 and 3 should be considered budgetary. 
  • On page 21 of the estimate where items 2.1-2.12 are summarized, they do NOT have the 44% burden added. But on page 1 the burden IS added taking the direct costs paid by the owner of $124,773.35 up to a fictional $179,657.53. This is inappropriate or an error. 

IN GENERAL, THE BUILDING ELEMENTS, ASSOCIATED EXPENSES, AND ESTIMATED COSTS FALL INTO THE FOLLOWING CATEGORIES:

  • The building element was the responsibility of the Tenant and requires repair (This is the only one that should be paid for by the tenant). 
  • The building element was the responsibility of the Owner (Common Area Maintenance) and should have been addressed during the life of the lease. 
  • The building element is exhibiting normal wear and tear and it is not the tenant's responsibility to upgrade. 
  • The building element is past it's useful service life. 
  • The building element is likely to be removed and replaced in the context of improvements for subsequent tenants. 

GENERAL PROJECT OPINIONS: 

  • The costs owed to the Landlord by the Tenant for the move out are less than $50,000.
  • Some of the expenses and estimated costs in the 12/1/2014 XXX Preliminary Cost of Repair Estimate are absurd to suggest that they are building maintenance requirements. 
  • The Landlord's 5/16/2012 estimate for repairs of approximately $100,000 was only twice what was reasonable, and the closest to reasonable and correct analysis and figures from the Owners. 
  • Substantial reconfiguration and upgrades to the project were executed after the termination of the lease and the turnover of the property, which rendered inapplicable some of the arguments over maintenance versus repair.

The Result

In the end, the award by the arbitrator was for the $40,000; which was what PFCS had estimated and testified to during expert deposition.