Rescission: An Equitable Remedy Not to be Overlooked by Tenants

Rescission is an equitable remedy that restores parties to a contract to their former status by undoing the original transaction. Until recently, proving the landlord’s material breach to rescind a commercial lease was challenging. A recent Florida case suggests that commercial tenants may rescind a lease agreement if delivery of leased premises is substantially delayed, particularly when the delay results from the landlord’s failure to timely complete tenant improvement works required under the lease. The case provides practical advice to landlords and tenants in California and other states.

In September 2025, the United States District Court in Florida, in a case called Advanced Care Pediatrics of Florida v. DPS PR Realty, Inc.¹ sided with a commercial tenant when it allowed the tenant to rescind a lease agreement. The facts stemmed from a lease the tenant had entered into for a planned pediatric extended care facility. Under the Lease, the landlord was required to construct and deliver the premises with the “Landlord’s Work” complete by a certain date. Landlord failed to deliver the premises on time. Four months later, with Landlord’s Work still not complete, the tenant wrote to the landlord that it may need to rescind the Lease. In fact, that facts suggested that the landlord had “misrepresented” the status of the completion of the work and during a walk-through of the premises by tenant, multiple issues were discovered, including that “work completed did not match the plans submitted” and that “work was not code compliant.”

Subsequently, tenant sent landlord a “Lease Termination Agreement,” which the landlord refused to sign. Some seven months after the scheduled delivery date, tenant sent a “Notice of Default and Tenant’s Termination of Lease.” When landlord refused to return tenant’s prepaid rent and security deposit, tenant brought a rescission action.

The District Court cited required elements for the rescission action as: (1) whether the parties are bound by the same contract; (2) the existence of a contract; (3) the existence of fraud, mutual mistake, false representation, impossibility of performance, or other ground for rescission or cancellation; (4) the party seeking rescission had rescinded the contract and notified the other party; (5) if the moving party has received benefits from the contract, it should further allege an offer to restore these benefits to the party furnishing them, if restoration is possible; and (6) the moving party has no adequate remedy at law. The Court found all elements were present and awarded tenant rescission and a return of all amounts owed by landlord.

What is interesting in the Court’s findings is its holding that “frustration of purpose” is grounds for rescission. “Frustration of purpose” refers to that condition surrounding the contracting parties where one of the parties finds that the purposes for which they bargained and which was known to the other party, have been frustrated because of the failure of consideration, or impossibility of performance by the other party. Here, the Court found that the “essential purpose” of the Lease was to deliver the premises “with the Landlord’s Work completed, which would have allowed Tenant to obtain licensure and operate a pediatric extended care facility.” It further stated that, because of the landlord’s default, the tenant was deprived of its “bargained for benefits,” thereby supporting rescission.

Similarly in California, a party may seek to rescind the contract based on: (1) improper consent “obtained through duress, menace, fraud, or undue influence” or (2) failure of consideration “through the fault of the party as to whom he rescinds” or “in a material respect for any cause.”²

However, at least in California, special attention is required as to whether the lease agreement includes a waiver provision. A California case suggests that a waiver of a commercial tenant’s right to terminate the contract in case of landlord’s breach is enforceable unless such waiver is unconscionable or against public policy.³

The Florida case, when placed in context with California’s position on rescission, provides some practical advice to tenants and landlords.⁴ This means that commercial tenants seeking to pursue rescission must closely review their leases to determine whether the lease agreement includes an enforceable provision limiting their rescission rights. Even if the lease includes such a waiver, courts will examine whether public policy concerns or unequal bargaining power is at play, making the enforceability of a rescission waiver a nuanced question. This presents drafting challenges and opportunities for landlords and for tenants which should be considered in documenting leases.

Please contact any of Buchalter’s leasing group attorneys if we can be of assistance.

[1] Advanced Care Pediatrics of Florida v. DPS PR Realty, Inc., 2025 WL 2531514.

[2] Civ. Code, § 1689(b)(1)-(4).

[3] Lee v. Placer Title Co. (1994) 28 Cal.App.4th 503.

[4] It appears that such a waiver is enforceable in California, New York, Texas, North Carolina, and Ohio. (Holly P. Constants, Freedom to Contract Injunction Waivers in Commercial Leases, Probate & Property, Vol. 36, No. 4 (July/August 2022).)

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