TEN “MUST HAVES” FOR LANDLORDS IN COMMERCIAL LEASES

 

Commercial landlords often have superior bargaining positions on lease terms with tenants. This gives commercial landlords a unique opportunity to establish the “Rules of the Game” in their subsequent relationship with the tenants.

The following are some of the important provisions which commercial landlords should place in their leases:

  1. Acceleration Clause. An acceleration clause allows a landlord, after a tenant defaults, to declare immediately due all of the tenant’s future rent. This avoids the situation of a cheated landlord having to wait for each month’s rent payment to fall due, before suing for that payment.

  2. Waiver of Jury Trial. When a tenant defaults, time is the tenant’s ally. The longer that the tenant can drag out an eviction, the longer the tenant can freeload in the landlord’s space. The attorneys defending tenants will sometimes demand a jury trial, which, because of court scheduling, drags out how long an eviction will take. Thus, commercial leases should include the waiver by tenants of their right to jury trial.

  3. Waiver of 3-Day Notice. Fla. Stat. 83.20 combines with Fla. Stat. 51.011 to give landlords the right to a summary (i.e. expedited) eviction procedure. This procedure normally includes a notice to tenants giving 3 days to pay up or vacate the rental space. The attorneys for tenants sometimes try to defend based on technical arguments against the form of the 3-Day Notice, or argue that, while the tenant owed rent, the figure stated in the 3-Day Notice includes late charges or other monies which the lease does not specifically label as rent. A Florida case Moskos vs. Hand, 247 So.2d 795 (Fla. 4th DCA 1971) provides that commercial tenants may waive their right to the 3-Day Notice. Thus, commercial landlords should include such a tenant’s waiver in their leases.

  4. Attorney’s Fee Reimbursement. Every lease should have an attorney’s fee clause stating that in the event of litigation or dispute, the prevailing party will be reimbursed its attorney’s fees by the loser. This helps to make whole a landlord who has to pursue a tenant. (Sometimes leases contain one-way attorney’s fee provision only entitling the landlord to attorney’s fees, but such clauses are made mutual (i.e. two-way) by Fla. Stat. 57.105(5)(2001)).

  5. Personal Guarantees. Most tenants form corporations or limited liability companies to conduct their business. By definition, the function of these entities is to limit the liabilities of the owners. This can render leases uncollectible, and the tenant’s obligation meaningless, unless the landlord requires the owners of the corporation or limited liability company to give personal guarantees. If the owners of the tenant will not do so, there seems little reason for the landlord to trust in the success of the tenant’s business more than the owners do.

  6. Limitations of Landlord’s Liability. Every lease should have an exculpation clause which states that the landlord is not liable for the actions of workers, other tenants, third parties, criminals, or natural events, in the absence of landlord’s gross negligence or intentional misconduct, with a pre-condition to any responsibility being that the landlord receives written notice of the problem and an opportunity to cure. Also, every lease should state that the landlord is not responsible for consequential or special damages of the tenant, or loss of profits, in the event of the landlord’s liability. This would mean, for instance, that if the landlord failed to repair a roof and the roof leaked, the landlord would be responsible for repairing or replacing the tenant’s water-damaged computer, but not responsible for the loss of profits on the business deal that was lost when the tenant’s business was interrupted.

  7. Definition of Landlord’s Repair Responsibilities. How much money a landlord spends on repair, upkeep, and adjustments within a tenant’s space can make a big difference on a landlord’s net profits. When possible, landlords should protect themselves from tenants who demand too much attention by providing that a landlord’s repair responsibility extends to the roof, structural walls, and electric and plumbing systems, but nothing else.

  8. No Set-off on Rent Payments. Sometimes tenants search for reasons to make subtractions from their rent payments. Landlords should preclude tenants from empowering themselves in such manner by the lease specifically stating that the rent is due without setoff or credit of any kind.

  9. Lease Controls Relationship. Leases should have an integration clause which states that the deal between the landlord and tenant is totally set forth in the lease, and no oral representations or other negotiations count. Leases should also state there can be no amendment or change in any party’s obligation except pursuant to a written amendment to lease signed by the parties and that no actions by landlord constitute a waiver. Once a landlord has a pro-landlord lease, it is important that the tenant be precluded from reaching outside of the lease to try to find something to use against the landlord.

  10. No Interest on Security Deposits. A Florida case states that where a security deposit was to be held by the landlord with interest, but that no rate was set, the landlord owed the tenant the statutory interest rate which, for most of the past six years, has been 10%. This is obviously more interest than the security deposit would have actually earned, and the best solution for landlords is for the lease to state that the security deposit will be held by the landlord with no interest due to tenant.

Most tenants pay and comply with their landlord’s expectations. With that background, landlords often assume that their leases are good, and continue using form leases of uncertain origin. Sooner or later, however, most landlords will be surprised by a bad tenant. For that reason, landlords should have their lease forms analyzed and updated to put them in the best position possible in the event of a bad tenant or unforeseen circumstances. The attorneys at Tucker & Tighe, P.A. are available for consultation on the content of commercial leases and enforcement.

Important note: This article is for general information only and is not intended to give any specific legal advise or opinion which should be sought from an attorney. The facts of any particular situation need to be examined before deciding on a legal course of action.

Important Note: This article is for general information only and is not intended to give any specific legal advice or opinion which should be sought from an attorney. The facts of any particular situation need to be examined before deciding on a legal course of action.

Copyright © 2001 by Tucker Tighe P.A. All rights reserved.