## Facts

- A landlord owned a vacant service-station site and negotiated a lease with a company that leased stations and sublet them to operators.
- During negotiations, the tenant’s representatives measured and believed the distance from the station to the front property line allowed pumps to sit 15 feet from the line.
- The written lease described the premises as extending 100 feet from the rear of the station to the front property line and restricted use to “use and occupation as a gas station.”
- The landlord had previously conveyed a 10-foot front strip of the tract to the city, reducing the pumps’ distance to 5 feet from the property line.
- A city ordinance required gas pumps to be at least 10 feet from the property line; the city refused a canopy permit once the violation was discovered.
- To operate legally, the tenant paid to move the pumps and related items, then demanded reimbursement; the landlord refused.
- After trial, the district court awarded the tenant compensatory damages (including the pump-relocation costs) and punitive damages based on findings of an implied warranty of suitability and reckless misrepresentations.
- The landlord appealed.

## Issues

1. Whether a commercial lease provision restricting the premises to a specific use (gas station) implies a covenant or warranty that the premises are suitable and legally usable for that purpose at lease inception.
2. Whether the landlord was liable for damages where a prior conveyance and existing ordinance rendered the restricted use unlawful absent costly modifications.
3. Whether the evidence supported punitive damages based on reckless misrepresentation.

## Decision

- The Kansas Supreme Court affirmed the judgment for the tenant.
- The use-restriction clause operated as an implied covenant or warranty that the premises were fit for use as a gas station.
- The landlord was liable for compensatory damages because the premises, as leased and described, were not legally usable for the restricted purpose without relocating the pumps.
- The punitive damages award was upheld because the evidence supported a finding of reckless misrepresentation.

## Legal Principles

- A commercial lease that restricts use to a specified purpose may carry an implied covenant or warranty that the premises are reasonably suitable for that purpose, including lawful usability under existing regulations at the time of leasing.
- A landlord who knows or should know that the premises cannot lawfully be used for the lease-restricted purpose due to existing ordinances and fails to disclose the defect may be liable for resulting damages.
- Punitive damages may be awarded when a landlord’s misrepresentations about suitability or legality are made with reckless disregard for the truth.

## Conclusion

The court held that restricting leased premises to operation as a gas station impliedly warranted lawful suitability for that use; because the landlord’s prior conveyance created an ordinance violation and his nondisclosure was reckless, the tenant recovered both compensatory costs to cure the defect and punitive damages.


Service Oil Co. v. White, 542 P.2d 652 (Kan. 1975)