IN THE SUPREME = COURT OF TEXAS

IN THE SUPREME COURT OF TEXAS

═════════_= 52;══

No. 05-0197

════════λ= 2;═══

Gym-N-I Playgrounds, = Inc.,=20 Petitioner,

Ron Snider,=20 Respondent

════════λ= 2;══════════&= #9552;═════════_= 52;══════════= ══════════ = 552;═

On Petition for Review from = the

Court of Appeals for the Third = District of=20 Texas

═════════_= 52;══════════= ══════════ = 552;══════════= ;══════════&#= 9552;

Argued September=20 27, 2006

Chief Justice Jefferson delivered the opinion of the = Court.=20

Commercial=20 real estate landlords impliedly warrant that their premises are suitable = for the=20 tenants=92 intended commercial purposes. In this case, however, the = tenants=20 expressly disclaimed that warranty. We must decide whether the = disclaimer=20 precludes the tenants=92 suit against the landlord for breach of the = warranty. We=20 also decide whether the tenants=92 agreement to lease the commercial = building =93as=20 is=94 prevents them from suing the landlord for other claims based on = the=20 property=92s condition. We answer both questions =93yes=94 and affirm = the court of=20 appeals=92 judgment.

Background

In = 1981, Ron=20 Snider founded Gym-N-I Playgrounds, Inc., a playground equipment = manufacturing=20 company. The business grew rapidly. In 1983, Snider purchased six acres = of land=20 in New Braunfels and subsequently=20 constructed a 20,075 square foot building for the business. By the late = 1980s,=20 Gym-N-I employed about twenty people, including Bonnie Caddell and Patrick Finn, to whom Snider later = sold the=20 business. Caddell was Gym-N-I=92s bookkeeper; Finn performed miscellaneous = jobs including=20 assembling and installing playgrounds, maintaining machinery, purchasing = supplies, and managing human resources.

The = City of=20 New Braunfels=92 fire code = requires owners=20 to install sprinkler systems for any building exceeding 20,000 square = feet if=20 the building contains certain combustible materials. Gym-N-I=92s building exceeded that threshold, and the = fire marshal=20 recommended, but did not require, that the building have a sprinkler = system.=20 Both Caddell and Finn knew that the fire = marshal=92s=20 recommendation was never implemented.

Eventually,=20 Finn and Caddell purchased the business, and = Snider=20 leased them the building. Each party was represented by counsel during = the lease=20 negotiations. Finn and Caddell decided not = to inspect=20 the premises before leasing because, as Caddell=20 testified, they =93knew more about the building=94 than anyone else. =

The = lease=20 provided that Gym-N-I would: (1) accept the building =93as is=20 ,=94 expressly waiving all warranties;[1] (2) obtain insurance on the = building to=20 cover fire-related loss;[2] and (3) perform maintenance and = repairs.[3] The lease also contained a = holdover=20 provision.[4]

The = lease was=20 signed on September 30, 1993, and the original term expired in September = of=20 1996. The parties did not execute a new instrument, but Gym-N-I = continued to pay=20 and Snider continued to accept monthly rent checks. On August 10, 2000, = a fire=20 destroyed the building.

Procedural=20 History

Snider=92s=20 insurer, American Economy Insurance Company, paid him approximately = $400,000 for=20 the loss of the building. Gym-N-I received nearly $1,000,000 under its = insurance=20 policy covering the building=92s contents and business interruption. = Thereafter,=20 American Economy brought a subrogation suit against Gym-N-I, which filed = cross-claims against American Economy and third-party claims against = Snider.=20 Ultimately, all parties other than Gym-N-I and Snider were dismissed = prior to=20 this appeal.

Gym-N-I=92s suit against Snider alleged that defective = electrical=20 wiring and the lack of a sprinkler system caused the fire.[5] Snider=92s summary judgment = motion argued=20 that all of Gym-N-I=92s claims, except the = breach of=20 contract claim, were barred by the =93as is=94 clause and warranty = disclaimer, or=20 were alternatively precluded by the lease=92s waiver of subrogation = clause. The=20 parties settled the contract claim, and the trial court granted Snider a = final=20 summary judgment. In the court of appeals, Gym-N-I argued that the =93as = is=94=20 clause was no longer in effect after the original lease term ended in = 1996, and=20 that even if it was, the clause was unenforceable. 158 S.W.3d=20 78, 83-84. The court of appeals affirmed the trial court=92s = judgment.=20 Id. at=20 81. We granted Gym-N-I=92s petition = for review.=20 49 Tex. Sup. Ct. J. 509 (Apr. = 21, 2006).=20

III

Issues=20 Presented

Gym-N-I=20 argues that: (1) the =93as is=94 clause lapsed when the original lease = term expired;=20 (2) the clause waives claims for breach of the implied warranty of = suitability,=20 negligence per se, gross negligence, and fraud; (3) the absence of a = sprinkler=20 system constitutes a latent premises defect; and (4) the waiver of = subrogation=20 clause is valid. We hold that the =93as is=94 clause was in effect at = the time of=20 the fire, the implied warranty of suitability disclaimer expressly and=20 effectively disclaimed that warranty, and the =93as is=94 clause negated = the=20 causation element of Gym-N-I=92s other = claims against=20 Snider. Consequently, we do not reach Gym-N-I=92s=20 remaining issues.

Discussion

Enforceability of=20 the =93as is=94 clause

Gym-N-I=20 argues that the =93as is=94 provision did not survive when lease=92s = original term=20 expired. Gym-N-I contends that because it never exercised the lease=92s = renewal=20 options,[6] and the lease expired almost = four years=20 before the fire, the parties =93shared a simple month-to-month, = landlord-tenant=20 relationship under the =91holding over=92 clause of the original = lease=94 when the=20 fire occurred. Citing Bockelman v. = Marynick, 788 S.W.2d 569 (Tex. 1990), = Gym-N-I=20 argues that the holdover tenancy is a =93new tenancy=94 to which the = terms of the=20 original lease do not apply.

Snider=20 responds that, under the written lease, the =93as is=94 clause, along = with all other=20 terms of the lease, governs during any holdover month-to-month tenancy. = The=20 court of appeals held that the =93as is=94 clause survived the original = lease term=92s=20 expiration. 158 S.W.3d at 84. We agree.

Gym-N-I and=20 Snider allowed the original lease agreement = to expire=20 without executing a new instrument. Because Gym-N-I continued to occupy = the=20 premises, it was a holdover tenant. The parties agree that their = relationship=20 was best characterized as a month-to-month tenancy as contemplated by = the=20 holdover clause in the lease. That clause provides that =93[a]ny holding over without written consent of = Landlord shall=20 constitute a lease from month-to-month, under the terms and = provisions of=20 this Lease to the extent applicable to a tenancy from = month-to-month.=94=20 (Emphasis added.) Although Gym-N-I argues that the tenancy is not = governed by=20 the lease=92s terms, we cannot ignore the plain and ordinary meaning of = the phrase=20 =93under the terms and provisions of this Lease.=94 We hold that = =93under the terms=20 and provisions of this Lease=94 means just that: the lease governed the=20 month-to-month tenancy. Thus, the =93as is=94 clause was in effect when = the fire=20 occurred.

Furthermore,=20 Gym-N-I=92s reliance on Bockelmann is misplaced. See Bockelmann, 788 S.W.2d = 569. In=20 that case, Brenda and Hermann Bockelmann, = husband and=20 wife, were cotenants in a residential lease. Id. at 570. Ten days before the lease expired, Brenda = separated=20 from Hermann and vacated the residence. Id. Hermann remained on = the=20 premises after the lease expired, triggering the lease=92s holdover = provision,=20 which provided that =93[s]hould Tenant = remain in=20 possession of the demised premises . . . after the natural expiration of = this=20 lease, a new tenancy from year to year shall be created between Lessor and Tenant which shall be subject to all = the terms=20 and conditions hereof . . . .=94 Id. Subsequently, Hermann = ceased paying=20 rent and the landlord sued both Hermann and Brenda to recover the unpaid = rent.=20 Id.=20

The = issue=20 before us was whether Brenda was liable for the rent that accrued while = Hermann=20 was a holdover tenant. Id. at=20 570. Holding that Brenda was not liable, we said that =93under = the express=20 terms of the lease, [Hermann=92s] holdover tenancy was a new tenancy = rather than=20 an extension or renewal of the original lease.=94 Id. at 571-72. Thus, Hermann=92s holdover tenancy was = not a=20 continuation of the original cotenancy, but = rather a=20 new tenancy for which only Hermann was liable. Id. at 572. Our use of the term =93new tenancy=94 came = directly from=20 the holdover provision of the lease. We did not say that the terms and=20 provisions of the original lease would not apply. To the contrary, we = gave=20 effect to the lease stating that =93this new tenancy would be subject to = the same=20 terms and conditions as the original tenancy.=94 Id. at 571. The difference between the original and = new=20 tenancies involved the parties who were bound, not the tenancy=92s terms = and=20 conditions. At least one court of appeals has recognized this important=20 distinction. Clark v. Whitehead, 874 S.W.2d 282, 283-84 (Tex.=20 App.=97Houston [1st Dist.] 1994, writ denied) (rejecting holdover = tenant=92s=20 argument that Bockelmann supports a = finding=20 that guarantees contained in the original lease did not apply to the = holdover=20 tenancy). Bockelmann stands for the = proposition=20 that a cotenant who does not holdover is not liable for unpaid rent = incurred=20 when the other cotenant holds over; thus, it does not support = Gym-N-I=92s argument that the original lease terms did = not apply to=20 the holdover tenancy.

Having=20 concluded that the =93as is=94 provision was still in effect when the = fire occurred,=20 we next address whether it waives some or all of Gym-N-I=92s claims.

Effect of the=20 implied warranty of suitability disclaimer

Gym-N-I=20 argues that the =93as is=94 provision cannot nullify the implied = warranty of=20 suitability as to the defects at issue in this case. Gym-N-I contends = that our=20 Davidow opinion authorized a waiver of the implied warranty of=20 suitability only when the lease makes the tenant responsible for certain = specifically enumerated defects. Davidow v. Inwood North Professional Group=96Phase I, 747 S.W.2d 373, 377 (Tex. 1988). = Consequently,=20 the general =93as is=94 provision in this lease could not waive the = warranty.

Snider=20 answers that Gym-N-I=92s claim for breach of = the implied=20 warranty of suitability is waived because the lease=92s =93as is=94 = clause expressly=20 disclaimed that warranty. See Prudential Ins. Co. Of Am. v.=20 Jefferson Assocs., Ltd., 896 S.W.2d = 156, 161=20 (Tex.=20 1995). We agree with Snider.[7]

We = first=20 recognized the implied warranty of suitability for intended commercial = purposes=20 in Davidow. 747 S.W.3d at 377. The = warranty=20 means =93that at the inception of the lease there are no latent defects = in the=20 facilities that are vital to the use of the premises for their intended=20 commercial purpose and that these essential facilities will remain in a = suitable=20 condition.=94 Id.

Davidow=20 illustrates the purpose of the implied warranty of suitability. Dr. = Davidow=20 leased office space from Inwood for his = medical=20 practice and began experiencing problems soon after moving into the = building.=20 Davidow, 747 S.W.2d at 374. The = problems were=20 extensive: inadequate air conditioning, a leaky roof, pest and rodent=20 infestations, inadequate lighting, periods of no electricity, a filthy = parking=20 lot, and repeated vandalization. Id. at=20 374-75. Davidow eventually vacated the premises and ceased paying = rent=20 before the lease expired. Id. at=20 375. Inwood sued Davidow for the = unpaid rent.=20 Id.=20 Davidow raised the affirmative defenses of material breach of contract = and=20 breach of the implied warranty that the premises were suitable for use = as a=20 medical office. Id. We agreed with Davidow=92s argument that =93commercial tenants = generally rely=20 on their landlords=92 greater abilities to inspect and repair the = premises.=94=20 Id. at=20 376. Davidow merely expanded the application of the = implied=20 warranty of habitability already recognized in residential leases in = Kamarath v. Bennett, 568 S.W.2d 658, = 660-61=20 (Tex. 1978).[8]

While=20 Davidow did not address whether or how the implied warranty of=20 suitability may be waived, we did say that if =93the parties to a lease = expressly=20 agree that the tenant will repair certain defects, then the provisions = of the=20 lease will control.=94 Davidow, 747 S.W.2d at = 377.=20 We also listed several factors to consider when determining a breach of = the=20 warranty, including:

the nature=20 of the defect; its effect on the tenant=92s use of the premises; the = length of=20 time the defect persisted; the age of the structure; the amount of the = rent; the=20 area in which the premises are located; whether the tenant waived the = defects; and whether the defect resulted from any unusual or = abnormal use by=20 the tenant.

Id. = (emphasis=20 added). Thus, Davidow both recognized the implied warranty of = suitability=20 and noted that the agreement=92s terms could alter that warranty. We had = no=20 occasion to decide the manner in which the warranty could be waived. =

Although we=20 have not spoken again on the scope of the waiver, several courts of=20 appeals=97including the court of appeals in this case=97have. See = Gym-N-I,=20 158 S.W.3d at 87 (=93[U]nder Davidow, = the =91as is=92=20 clause negates the implied warranty of suitability itself.=94); Lee = v. Perez,=20 120 S.W.3d 463, 468 (Tex. App.=97Houston [14th Dist.] 2003, no pet.) = (noting=20 that an =93as is=94 clause may waive implied warranties, but concluding = that the=20 clause in this case did not waive the deed restriction defect at issue = because=20 the scope of the =93as is=94 waiver was limited to physical conditions = on the=20 property); cf. Parts Indus. Corp. v. A.V.A. Servs., Inc., 104 S.W.3d 671, 680 (Tex. = App.=97Corpus=20 Christi 2003, no pet.) (=93As a matter of law, the landlord=92s implied = warranty of=20 suitability for commercial purposes is limited only by those specific = terms in a=20 commercial lease whereby a tenant expressly agrees to repair certain = defects.=94);=20 Gober v. Wright, 838 S.W.2d = 794, 798=20 (Tex. App.=97Houston [1st Dist.] 1992, writ denied) (same). The Parts = Industries and Gober courts = agreed that the=20 implied warranty of suitability can only be waived as to specific = conditions=20 where the =93tenant expressly agrees to repair certain defects.=94 = Parts=20 Indus., 104 S.W.3d at 680; Gober, 838 S.W.2d at 798. Neither of these = cases,=20 however, involved an express disclaimer of the implied warranty of = suitability=20 like the lease at issue here. Moreover, the leases in Parts = Industries=20 and Gober expressly made the = lessor responsible for the defects at issue. = Parts=20 Indus., 104 S.W.3d at 675 (finding that the lessor=20 agreed to keep the roof=97the defect at issue=97=93in good repair=94); = Gober, 838 S. W.2d at 796 (finding that = under the=20 lease, the lessors were responsible for = repair of the=20 roof=97the defect at issue). Therefore, Gym-N-I is = distinguishable from=20 Parts Industries and Gober = because the=20 lease expressly disclaims the implied warranty of suitability. Here, the = court=20 of appeals determined that under Prudential, the =93as is=94 = clause would=20 foreclose the implied warranty of suitability claim.[9] 158 S.W.3d = at=20 87. We agree.

In=20 Prudential, we were asked to determine the effect of an =93as = is=94 clause on=20 a buyer=92s claim for damages against the seller based on the condition = of the=20 commercial property. 896 S.W.2d at 158-59. In = that=20 case, Goldman bought an office building from Prudential Insurance = Company.=20 Id. at=20 159. The contract=92s =93as is=94 clause provided:

Seller and=20 Purchaser agree that Purchaser is taking the Property =93AS IS=94 with = any and all=20 latent and patent defects and that there is no warranty by Seller that = the=20 Property is fit for a particular purpose. Purchaser acknowledges that it = is not=20 relying upon any representation, statement or other assertion with = respect to=20 the Property condition, but is relying upon its examination of the = Property.=20 Purchaser takes the Property under the express understanding there are = no=20 express or implied warranties (except for limited warranties of title = set forth=20 in the closing documents).

Id. at=20 160. Goldman, a knowledgeable real estate investor, had the = property=20 inspected by his maintenance supervisor, his property manager, and an=20 independent professional engineering firm; none of the inspectors = discovered the=20 asbestos that would later become the basis of the lawsuit. Id. at=20 159. In addition, there was no evidence that Prudential = knew=97before the=20 parties completed the sale=97that the building contained asbestos. = Id. at=20 159-60. Goldman later discovered that the building contained = asbestos=20 fireproofing when he tried to refinance the building. Id. at=20 160. He sued Prudential, alleging violations of the Texas = Deceptive Trade=20 Practices=97Consumer Protection Act, negligence, fraud, and breach of = the duty of=20 good faith and fair dealing. Id. at=20 160. We held that the =93as is=94 provision negated the causation = element=20 necessary for Goldman to recover on each asserted cause of action. = Id. at=20 161.

The sole=20 cause of a buyer=92s injury [when he agrees to purchase something =93as = is=94], by his=20 own admission, is the buyer himself. He has agreed to take the full risk = of=20 determining the value of the purchase. He is = not=20 obliged to do so; he could insist instead that the seller assume part or = all of=20 that risk by obtaining warranties to the desired effect. If the seller = is=20 willing to give such assurances, however, he will ordinarily insist upon = additional compensation. Rather than pay more, a buyer may choose to = rely=20 entirely upon his own determination of the condition and value of his = purchase.=20 In making this choice, he removes the possibility that the seller=92s = conduct will=20 cause him damage.

Id. = Thus,=20 by agreeing to purchase the property =93as is,=94 Goldman agreed to rely = on his own=20 appraisal of the bargain, and he accepted the risk that he may err. = Id. We = did not=20 address what effect, if any, an =93as is=94 provision would have on a = claim for=20 breach of the implied warranty of suitability, as this warranty applies = only to=20 commercial leases and Prudential involved a sale of = commercial=20 property.

Today, we=20 squarely address whether an express disclaimer may waive the implied = warranty of=20 suitability in a commercial lease. Davidow noted that the = provisions of=20 the lease would control if the parties expressly agreed that the tenant = would=20 repair certain defects. 747 S.W.2d at 377.=20 Prudential stands for the proposition that=97absent fraud in the=20 inducement=97an =93as is=94 provision can waive claims based on a = condition of the=20 property. 896 S.W.2d at 161. Taken together, = these=20 cases lead to one logical conclusion: the implied warranty of = suitability is=20 waived when, as here, the lease expressly disclaims that warranty. We = hold,=20 therefore, that as a matter of law, Gym-N-I waived the implied warranty = of=20 suitability.[10]

Our conclusion that the implied warranty of = suitability may=20 be contractually waived is also supported by public policy. Texas = strongly favors=20 parties=92 freedom of contract. BMG Direct Mktg., Inc. v. Peake, 178 S.W.3d 763, 767 (Tex. 2005); In = re=20 Prudential Ins. Co. of Am., 148 S.W.3d 124, 129 (Tex. 2004) (=93As a = rule,=20 parties have the right to contract as they see fit as long as their = agreement=20 does not violate the law or public policy.=94). We recently reaffirmed = this=20 policy, stating that:

[P]ublic policy = requires . . .=20 that men of full age and competent understanding shall have the utmost = liberty=20 of contracting, and that their contracts when entered into freely and=20 voluntarily shall be held sacred and shall be enforced by Courts of = justice.=20 Therefore, you have this paramount public policy to consider=97that you = are not=20 lightly to interfere with this freedom of contract.

BMG Direct, 178=20 S.W.3d at 767 (quoting Wood Motor Co. v. Nebel,=20 238 S.W.2d 181, 185 (1951)). Freedom of contract allows parties to = bargain for=20 mutually agreeable terms and allocate risks as they see fit. A lessee = may wish=20 to make her own determination of the commercial suitability of premises = for her=20 intended purposes. By assuming the risk that the premises may be = unsuitable, she=20 may negotiate a lower lease price that reflects that risk allocation.=20 Alternatively, the lessee is free to rely on the lessor=92s assurances and negotiate a contract = that leaves the=20 implied warranty of suitability intact.

We recognize that our holding today stands in = contrast to=20 the implied warranty of habitability, which =93can be waived only to the = extent=20 that defects are adequately disclosed.=94 Centex = Homes v.=20 Buecher, 95 S.W.3d 266, 274 (Tex. = 2002).[11] The implied warranty of = habitability=20 =93applies in almost all jurisdictions only to residential tenancies=94 = while=20 commercial tenancies are =93excluded primarily on the rationale that the = feature=20 of unequal bargaining power justifying the imposition of the warranty in = residential leases is not present in commercial transactions.=94 2 Richard R. Powell, Powell on Real = Property=20 _ 233[2][b] (Patrick J. = Rohan, ed., 1991).[12] While most states recognize = the implied=20 warranty of habitability, four of the six state high courts to consider = the=20 implied warranty of suitability in commercial leases have declined to = adopt=20 it.[13] The fact that the lessor impliedly warrants suitability in = Texas ensures = that, when=20 the warranty is waived, the parties focus their attention on who is = responsible=20 for discovering and repairing latent defects, and they may allocate the = risk=20 accordingly. We see no compelling reason to disturb that market = transaction=20 here.

Gym-N-I=92s other = claims against=20 Snider

The trial court granted summary judgment for = Snider on=20 Gym-N-I=92s other claims, including = negligence per se,=20 gross negligence, violations of the Deceptive Trade Practices-Consumer=20 Protection Act, and fraud. Gym-N-I argues that record evidence supports = each=20 claim. The court of appeals held that, as a matter of law, the =93as = is=94 clause=20 negated the causation element essential to each of these causes of = action. 158=20 S.W.3d at 86 (citing Prudential, 896 S.W.2d at 161). We agree.=20

By agreeing to lease property =93as is,=94 a = lessee agrees to=20 make his own appraisal of the bargain and accepts the risk that he may = misjudge=20 its value. Prudential, 896 S.W.2d at = 161.=20 The lessor gives no assurances, express or = implied,=20 concerning the value or condition of the premises. Id. = Thus, an =93as=20 is=94 agreement precludes the lessee from proving that the lessor=92s conduct caused harm. Id. =

Gym-N-I expressly agreed to =93accept[] the Premises =91as is.=92=94 Gym-N-I = further agreed that=20 Snider =93has not made and does not make any representations as to the = commercial=20 suitability, physical condition, layout, footage, expenses, operation or = any=20 other matter affecting or relating to the premises.=94 Therefore, = Gym-N-I=20 contractually disavowed any reliance upon any representation by Snider. = Prudential, 896 S.W.2d at 161. By agreeing = to lease=20 the building =93as is,=94 Gym-N-I agreed to make its own appraisal of = the physical=20 condition of the premises. Id. Thus, the sole cause of = Gym-N-I=92s injury, by its own admission, is itself. = Id. We = hold,=20 therefore, that the =93as is=94 clause negates Gym-N-I=92s=20 claim that Snider=92s actions caused injury.[14]

Because we hold that all of Gym-N-I=92s claims are foreclosed by the =93as is=94 = clause and express=20 disclaimer of the implied warranty of suitability, we do not reach = Gym-N-I=92s other issues.

Conclusion

For the reasons stated, we affirm the court of = appeals=92=20 judgment. Tex. R. App.=20 P. 60.2(a).

______________________________

Wallace B. Jefferson

Chief Justice

OPINION DELIVERED: April 20, 2007 =

^[1] =

ACCEPTANCE OF PREMISES:

(a) Tenant [Gym-N-I] accepts the Premises = =93as is.=94=20 LANDLORD [Snider] HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATIONS = AS TO=20 THE COMMERCIAL SUITABILITY, PHYSICAL CONDITION, LAYOUT, FOOTAGE, = EXPENSES,=20 OPERATION OR ANY OTHER MATTER AFFECTING OR RELATING TO THE PREMISES AND = THIS=20 AGREEMENT, EXCEPT AS HEREIN SPECIFICALLY SET FORTH OR REFERRED TO AND = TENANT=20 HEREBY EXPRESSLY ACKNOWLEDGES THAT NO SUCH REPRESENTATIONS HAVE BEEN = MADE.=20 LANDLORD MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, OF = MERCHANTABILITY,=20 MARKETABILITY, FITNESS OR SUITABILITY FOR A PARTICULAR PURPOSE OR = OTHERWISE,=20 EXCEPT AS SET FORTH HEREIN. ANY IMPLIED WARRANTIES ARE EXPRESSLY = DISCLAIMED AND=20 EXCLUDED.

* * *

(e) THE REPRESENTATIONS, WARRANTIES, = COVENANTS,=20 TERMS, CONDITIONS, AND WAIVERS SET FORTH IN=20 THIS SECTION SHALL SURVIVE THE TERMINATION OF THE LEASE.

^[2] = Paragraph=20 fourteen of the lease required Gym-N-I to insure =93all buildings and = improvements=20 on the Leased premises . . . against loss or damage by fire.=94 =

^[3] =

MAINTENANCE OBLIGATIONS = OF=20 TENANT. Tenant = covenants and=20 agrees, at Tenant=92s sole cost and expense, to perform all maintenance = and=20 repairs of the Premises and to repair or replace any damage or injury = done to=20 the Premises, or any part thereof, caused by any reason, except the = gross=20 negligence of Landlord. All such maintenance and repairs shall restore = the=20 Premises to the same or as good a condition as existed prior to such = injury or=20 damage and shall be effected in compliance = with all=20 building and fire codes and other applicable laws and=20 regulations.

^[4] = HOLDING=20 OVER: Any holding over without written consent of Landlord shall = constitute=20 a lease from month-to-month, under the terms and provisions of this = Lease to the=20 extent applicable to a tenancy from month-to-month . . . .

^[5] = Gym-N-I sued=20 for negligence, negligence per se, gross negligence, Deceptive Trade=20 Practices=96Consumer Protection Act violations, breach of the implied = warranty of=20 suitability for commercial purposes, fraud, premises liability, res ipsa loquitur, and breach of contract.

^[6] = The lease=20 provided two options for renewal, one in the original document and = another in a=20 signed amendment to the lease. The clauses granted Gym-N-I an =93option = to extend=20 the term of this Lease=94 for two year terms upon ninety days notice = prior to the=20 expiration of the current term.

^[7] = Because the=20 =93as is=94 clause at issue in this case expressly disclaimed the = implied warranty=20 of suitability, we do not address whether an =93as is=94 clause lacking = express=20 disclaimer language would effectively waive the implied warranty of = suitability.=20

^[8] = After our=20 Kamarath decision, the Legislature = quickly=20 passed a statute governing the implied warranty of habitability in = residential=20 rental property. See Act of May 28, 1979, 66th Leg., R.S., ch. 780, __ 1-18, 1979 Tex. Gen. Laws 1978 (current = version at=20 Tex. Prop. Code __=20 92.001-.061).

^[9] = Lee=20 also supports this reading of Prudential. Lee v. = Perez, 120 S.W.3d 463. In that case, the landlord argued = that the=20 lease=92s =93as is=94 clause waived the implied warranty of suitability. = Id. at=20 467-68. The court of appeals noted that an =93as is=94 clause = =93may indeed=20 waive express or implied warranties.=94 Id. at 468 (citing Prudential). It concluded, = though,=20 that the deed restriction defect at issue was not waived by the clause = in that=20 case because its waiver was limited to physical conditions on the = property.=20 Id.=20

^[10] = Normally,=20 under Prudential, a court must first determine whether the =93as = is=94 clause=20 is enforceable. 896 S.W.2d at 162 (listing factors = to be=20 considered in determining whether the =93as is=94 clause is = enforceable). We=20 do not address this preliminary question, however, because the court of = appeals=20 found that the =93as is=94 clause was enforceable, and neither party has = challenged=20 that finding. 158 S.W.3d at 84-85. =

^[11] = After we=20 decided Centex Homes, the Legislature created the Texas = Residential=20 Construction Commission and gave it rulemaking authority to create = statutory=20 warranties of workmanship and habitability as to new residential = construction.=20 See Tex. Prop. Code _ 408.001(2). These = statutory=20 warranties are exclusive and supercede all = previous=20 implied warranties of workmanship and habitability. Id. _ 430.006. The = Commission=20 created a statutory warranty of habitability obligating a builder to = construct a=20 home that is =93safe, sanitary and fit for humans to inhabit=94 and = prohibited=20 parties from contractually waiving or modifying the warranty. 10 Tex. Admin. = Code _ 304.3 (f), (i) (2005)=20 (Tex.=20 Residential Constr. Comm=92n,=20 Limited Warranties).

^[12] = See=20 also Restatement (Second) = of=20 Property, Landlord & Tenant _ 5.1 cmt. b (1977) = (endorsing=20 the implied warranty of habitability in residential leases but taking no = position as to whether it should be extended to commercial leases, = noting that=20 such leases =93are usually made under circumstances of greater equality = of=20 bargaining power than in the case of residential properties and the=20 considerations that affect decisions often differ in the two situations = so far=20 as the condition of the premises on the date the lease is made is = concerned=94);=20 Paula C. Murray, The Evolution of Implied Warranties in Commercial = Real=20 Estate Leases, 28 U. Rich. = L. Rev.=20 145, 160-62 (1994) (=93Courts that have eagerly embraced the = notion of=20 implied covenants in residential leases have not been very willing to do = so in=20 the commercial context.=94); Anthony J. Vlatas, An=20 Economic Analysis of Implied Warranties of Fitness in Commercial = Leases, 94=20 Colum. L. Rev. 658, = 667-69 (1994)=20 (=93[M]any legislatures and courts have implied a warranty of = =91habitability=92 into=20 leases of real property for residential purposes. . . . [A]uthorities have divided over whether the law = should now also=20 imply a warranty of commercial-leasehold fitness.=94).

^[13] = See Serv. Oil Co. v. White, 542 P.2d 652, 659-60 = (Kan. 1975)=20 (refusing to recognize implied warranty of suitability because a = =93lessee [of=20 commercial property] does not generally occupy an inferior bargaining = position=94=20 and =93[t]he higher standards of personal facilities vital to public = health and=20 welfare required for residential property are not generally required for = business or commercial property=94); Gehrke v.=20 Gen Theatre Corp., 298 N.W.2d 773, 775 (Neb. 1980) (=93In the = absence of an=20 express agreement to the contrary, a lessor = does not=20 warrant the fitness or safety of the premises and the lessee takes them = as he=20 finds them.=94);Golub v. = Colby, 419 A.2d=20 397, 398 (N.H. 1980) (=93[W]e decline to extend, to commercial leases, = the implied=20 warranty of habitability found to exist in residential leases.=94); = B.W.S.=20 Invs. v. Mid-Am Rests., Inc., 459 N.W.2d = 759, 763=20 (N.D. 1990) (=93While North Dakota statutory law requires a landlord of = a=20 residential dwelling unit to =91make all repairs and do whatever = is=20 necessary to put and keep the premises in a fit and habitable = condition,=92 there=20 is no statutory authority or case law authority in North Dakota that = supports=20 [the tenant=92s] argument for an implied warranty of habitability or = fitness for a=20 lease on commercial property.=94) (internal = citations=20 omitted). Contra Reste Realty Corp. v. Cooper, 251 = A.2d 268,=20 273 (N.J. 1969); Davidow, 747 S.W.2d 373. =

^[14] = In=20 Prudential, we noted than an =93as is=94 agreement procured by = fraudulent=20 inducement would not negate the causation element of a = fraud-in-the-inducement=20 claim. 896 S.W.2d at 161. We need not = consider that=20 exception in this case because Gym-N-I has not asserted that claim.=20