We use cookies to provide you with a better experience. By continuing to browse the site you are agreeing to our use of cookies in accordance with our Cookie Policy.
Liquidated damages clauses can be a convenient way to incentivize performance and avoid disputes over the price tag of breaches. One common use of such clauses is to require the tenant to pay predetermined rent increases in the event it violates a covenant not to open a competing business within a specific radius of the leased property. But getting courts to enforce such a provision can be difficult, as illustrated by the scenario below.
Commercial property is condemned. The tenant, a petroleum company, seeks a portion of the condemnation award compensating it for its remaining leasehold interest. The lease includes the following two provisions dealing with the tenant’s rights in the event the property is condemned during the lease term:
An electronics store leases 3,000 square feet of shopping center space. But the city won’t let the store operate until wheelchair ramps are installed and the parking lot is re-striped to comply with the Americans with Disabilities Act (ADA). The owner refuses to do the work. So the tenant pays a contractor $30,000 to make the required modifications and sues the owner for its costs, claiming breach of the lease. Key lease terms:
A restaurant in Seattle signs a fixed-term lease containing the following clause:
Lease Termination Date. The term of this Lease is 36 months and shall expire at midnight on May 31, 2019, or such earlier or later date as provided in Section 3 (the “Termination Date”). LANDLORD MAY TERMINATE THIS LEASE WITH A SIXTY (60) DAY WRITTEN NOTICE TO TERMINATE THE LEASE.
SITUATION: Just before the pandemic hit, a landlord agreed to lease one floor and the basement of a three-story building previously used for warehousing to a lumber and leather goods store. Although the landlord had to shutter the property temporarily, the deal remained on track. Now the landlord has gotten official permission to reopen, and the tenant is prepared to move in.
SITUATION: With 24 months remaining on its lease, a tenant vacates the premises and stops paying its $10,000 per month rent. After six months of marketing and sales efforts, the landlord finds a replacement tenant willing to pay $15,000 per month. The replacement tenant also pays the landlord a $200,000 allowance to make improvements to the property. Six months later, the new tenant moves in and begins paying rent. Meanwhile, the landlord sues the original tenant for the unpaid rent left on the lease.
SITUATION: A tenant leases property to operate a car wash. The lease requires the tenant to keep the property in good repair. The actual language:
The Tenant shall keep the Demised premises in good condition and repair . . . the tenant, at its sole cost and expense, will take good care of the Demised Premises . . . and will keep the same in good order and condition and make all necessary repairs thereto, interior and exterior, ordinary and extraordinary, foreseen and unforeseen.
Situation: A landlord sends a default notice and is preparing to evict a spa tenant that owes nearly $53,000 in unpaid rent. But the tenant beats the landlord to the punch by filing its own lawsuit asking the court to enjoin the landlord from terminating the lease. The tenant’s complaint raises eight claims, all based on the theory that the agreement between the parties isn’t a lease but an oral partnership. The landlord prevails on all eight claims. There’s a valid lease and the tenant has violated it, the court rules.
SITUATION: A tenant leases restaurant space with its principal acting as guarantor. Under the guaranty agreement, the landlord is allowed to show the tenant leniency and make lease modifications, extensions, or amendments with the tenant without notifying the guarantor.
RSS