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Click here for the full text of this decision FACTS:In 1981, Ron Snider founded Gym-N-I Playgrounds Inc., a playground equipment manufacturing company. The business grew rapidly. In 1983, Snider purchased six acres of land in New Braunfels and subsequently constructed a 20,075 square foot building for the business. By the late 1980s, Gym-N-I employed about 20 people, including Bonnie Caddell and Patrick Finn, to whom Snider later sold the business. Caddell was Gym-N-I’s bookkeeper; Finn performed miscellaneous jobs including assembling and installing playgrounds, maintaining machinery, purchasing supplies and managing human resources. The city of New Braunfels’ fire code requires owners to install sprinkler systems for any building exceeding 20,000 square feet if the building contains certain combustible materials. Gym-N-I’s building exceeded that threshold, and the fire marshal recommended but did not require that Snider install a sprinkler system. Both Caddell and Finn knew that the fire marshal’s recommendation was never implemented. Eventually, Finn and Caddell purchased the business, and Snider leased them the building. Attorneys represented each party during the lease negotiations. Finn and Caddell decided not to inspect the premises before leasing because, as Caddell testified, they “knew more about the building” than anyone else. The lease provided that Gym-N-I would: accept the building “as is,” expressly waiving all warranties; obtain insurance on the building to cover fire-related loss; and perform maintenance and repairs. The lease also contained a holdover provision. The lease was signed on Sept. 30, 1993, and the original term expired in September of 1996. The parties did not execute a new instrument, but Gym-N-I continued to pay and Snider continued to accept monthly rent checks. On Aug. 10, 2000, a fire destroyed the building. Snider’s insurer, American Economy Insurance Co., paid him approximately $400,000 for the loss of the building. Gym-N-I received nearly $1 million under its insurance policy covering the building’s contents and business interruption. Thereafter, American Economy brought a subrogation suit against Gym-N-I, which filed cross-claims against American Economy and third-party claims against Snider. Ultimately, all parties other than Gym-N-I and Snider were dismissed prior to this appeal. Gym-N-I’s suit against Snider alleged that defective electrical wiring and the lack of a sprinkler system caused the fire. Snider’s summary judgment motion argued that all of Gym-N-I’s claims, except the breach of contract claim, were barred by the “as is” clause and warranty disclaimer, or were alternatively precluded by the lease’s waiver of subrogation clause. The parties settled the contract claim, and the trial court granted Snider a final summary judgment. In the court of appeals, Gym-N-I argued that the “as is” clause was no longer in effect after the original lease term ended in 1996, and that even if it was, the clause was unenforceable. HOLDING:Affirmed. The Texas Supreme Court framed the issue as follows: “Commercial real estate landlords impliedly warrant that their premises are suitable for the tenants’ intended commercial purposes. In this case, however, the tenants expressly disclaimed that warranty. We must decide whether the disclaimer precludes the tenants’ suit against the landlord for breach of the warranty. We also decide whether the tenants’ agreement to lease the commercial building”as is’ prevents them from suing the landlord for other claims based on the property’s condition.” Gym-N-I and Snider, the court stated, allowed the original lease agreement to expire without executing a new instrument. Because Gym-N-I continued to occupy the premises, it was a holdover tenant. The lease contained a holdover clause that provided that “[a]ny holding over without written consent of Landlord shall constitute a lease from month-to-month, under the terms and provisions of this Lease to the extent applicable to a tenancy from month-to-month.” Thus, the court found that the “as is” clause was in effect when the fire occurred. Citing the Texas Supreme Court’s 1988 opinion Davidow v. Inwood North Professional Group � Phase I, Gym-N-I argued that the “as is” provision could not nullify the implied warranty of suitability as to the defects at issue in this case. Gym-N-I contended that Davidow authorizes a waiver of the implied warranty of suitability only when the lease makes the tenant responsible for certain specifically enumerated defects. But the court read its precedents differently to find that “the implied warranty of suitability is waived when, as here, the lease expressly disclaims that warranty.” The court therefore held that Gym-N-I waived the implied warranty of suitability. OPINION:Jefferson, C.J., delivered the opinion of the court.

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