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A commercial lease to an auto shop tenant includes three key clauses:
1. Tenant’s duty to maintain insurance. Section 19 of the lease requires the tenant to maintain fire, business, and liability insurance on the property and name the landlord as an additional insured. It also provides that “tenant shall provide Landlord with a copy of all policies of insurance within 30 days of Landlord's request of same.”
As many of us learned during the COVID-19 pandemic, it’s not uncommon for landlords and tenants to revise their lease terms on the fly in response to changing conditions. The general rule is that it’s okay to revise a written lease, provided that those changes are themselves put in writing. This is particularly true when, as is often the case, the lease includes a clause expressly barring oral modifications of lease terms. After all, written leases would become meaningless if parties could claim they had an oral agreement allowing them to violate the lease’s terms.
The recipe for legally evicting a tenant contains two essential ingredients:
A valid substantive case—that is, proof that the tenant has violated a material duty under the lease without having a legal defense excusing the default; and
Proper procedures for not only eviction but also, in many cases, notification and opportunity to cure.
While the primary focus for many landlords is the first ingredient, it’s the second ingredient that determines the lion's share of cases. Consider the scenario below.
A tenant’s customers and other “invitees” can create nuisances or disruptions that not only disturb other tenants but also harm a shopping center, office building, or other property’s image and reputation. While most leases seek to hold tenants accountable for their invitees, these protections won’t work if they’re poorly drafted. The following scenario illustrates some of the common problems in invitee clauses.
While it normally doesn’t disrupt the lease, the sale of leased property can be disconcerting to tenants. That’s why some tenants negotiate for first refusal rights giving them the option to purchase the property at the same price and terms the landlord accepts from a third-party purchaser in the event it decides to put the property on the market.
Every time you lease space to a tenant, you incur opportunity costs to the extent a more desirable tenant in need of that same space turns up later. That’s why clauses allowing you to relocate tenants to comparable space within the shopping center or building can be extremely valuable. Relocation clauses also give you the flexibility you need to carry out property-wide renovations and maintain the optimal tenant mix. However, like any other lease provision, a relocation clause can blow up in your face if it’s not properly drafted.
Security deposits remain a bone of contention in commercial leasing litigation, particularly now that COVID-19 eviction restrictions have been lifted. Typically, the obligation to return the security deposit begins when the tenant surrenders the premises. The following scenario, which is based on an actual case, illustrates some of the issues that may arise in determining whether a surrender has occurred.
SITUATION
April 15: A tenant signs a five-year lease and makes a $9,000 security deposit payment on a vacant office building for use as a daycare center.
A restaurant tenant isn’t happy about what it deems to be the landlord’s inadequate efforts to market the mall and abandons the property. Instead of immediately seeking a replacement, the landlord lets the space remain vacant and sues the tenant for rent.
We didn’t default on the lease, the tenant insists. And even if we did, we shouldn’t be on the hook for full rent payments because the landlord didn’t take steps to mitigate its damages.
A restaurant tenant isn’t happy about what it deems to be the landlord’s inadequate efforts to market the mall and abandons the property. Instead of immediately seeking a replacement, the landlord lets the space remain vacant and sues the tenant for rent.
We didn’t default on the lease, the tenant insists. And even if we did, we shouldn’t be on the hook for full rent payments because the landlord didn’t take steps to mitigate its damages.
Workers hired by the landlord of a medical office building place a 55-gallon barrel that’s been cut in half to serve as a planter on the access ramp leading to the only public entrance of the building, leaving just 30 inches on either side for entrants to squeeze through. In addition to making it hard for mobility-impaired persons to maneuver on the ramp, the planter is placed at a point where the ramp is elevated several inches above the level of the parking lot.
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