I have been managing a build out for a tenant space for the last 8 months now. This was supposed to take 3 months. The Contractor had various personal issues and professional f-ups holding up the job. I fired him last week. Meanwhile in the background he was bidding the next job for the actual tenant's store fixtures etc. That tenant asked me if he was working for me still. I said "No." The tenant wanted to know why. I said he wasn't acting urgent enough to ready the space. The tenant, of course, dropped the Contractor. The Contracor then called to ask me if I told the tenant anything. I lied and said I told the tenant that he didn't work for me anymore, that's it.

I really did not want to this tenant to get the BS end of the stick that I did for the last several months. I know the ettiquette is bad, but are the ethics as well?

Contractor was a POS, you called him on it, and related your experience to the tenant. I'm assuming after your bad experience, you have no intention of working with the contractor again, so why not tell him the truth? He didn't deliver and doesn't deserve a good rec, and I'd have no trouble telling him so. I've done it more than once.

Yeah, I am not out of my skin about it. He knows how I feel already. I'll add that he is not a very rational stable person, hence his personal issues messing into the job. He showed up today looking for I dunno what, but he had some bumps and scratches on his face.

This is the right answer. Telling him the truth woulda just gotten you a framing hammer through a window.