LEASE AGREEMENT REFERENCE GUIDE 1500: STRATEGIES FOR THE PRO-LANDLORD TENANT DEFAULT CLAUSE $49.95
STRATEGIES FOR THE PRO-LANDLORD TENANT DEFAULT CLAUSE
Fortunately for the commercial landlords of this world, most tenants pay their rent and perform their obligations under the leases they sign. This sort of orderly performance by tenants can produce a certain complacency in landlords concerning the boiler plate they put in their tenant default clauses. But landlords can ill afford to be complacent about tenant default issues, since just one defaulting tenant can turn into a full time job for a landlord.
As markets around the country tighten up and vacancy rates drop, now might be an ideal time for commercial landlords to compare their tenant default clauses to the pro-landlord provision featured in this LARG’s Lease Clause Critique, and to consider adding one or more of the following devices to their form leases.
Pro-Landlord Device #1
The Habitual Default Clause
Typically, the default clause in a landlord oriented lease will specifically define certain items which constitute a default under the lease. Often defaults are divided into monetary defaults that involve payment of money and non-monetary defaults that do not. The normal default clause will contain “cure periods” in which the tenant can cure a default before the landlord may exercise its remedies under the lease.
While these cure periods are appropriate for the occasional or inadvertent default by the tenant, they can allow a tenant to default under the lease on a chronic basis. Each time the tenant defaults, the landlord must give a default notice to the tenant (if it is required under the lease). The tenant will then wait the maximum term of the cure period, and then cure the default by taking the necessary action.
This process creates an administrative burden for the landlord, since the landlord must constantly monitor the tenant's performance, and respond with a notice if the tenant defaults in order to commence eviction proceedings. This process is especially vexing if the default involves the payment of rent by the tenant, since the landlord must “hound” the tenant to get the monthly rent.
The following clause is designed to take care of this problem for the landlord. It provides that if the tenant defaults more than three times over a twelve month period, such conduct constitutes a separate and noncurable default by the tenant, permitting the landlord to seek termination of the lease or exercise its other remedies under the default clause.
Obviously, the landlord must keep a detailed record of the past events of default and document them through correspondence to the tenant, and memoranda to the lease file. Such attention to detail will pay dividends if the tenant disputes the applicability of the clause and contends that it did not commit the number of prior defaults for the landlord to invoke the clause.
Pro-Landlord Habitual Default Provision
Notwithstanding anything to the contrary contained in the lease’s provisions pertaining to tenant default, the parties hereto agree that if the tenant shall have defaulted in the performance of any (but not necessarily the same) term or condition of this lease for three or more times during any twelve month period during the term hereof, then such conduct shall, at the election of the Landlord, constitute a separate event of default which cannot be cured by the Tenant. Tenant acknowledges that the purpose of this provision is to prevent repetitive defaults by the Tenant under the lease, which work a hardship upon the Landlord, and deprive the Landlord of the timely performance by the Tenant hereunder.