Default Provisions in Commercial Leases: Tenant and Landlord Negotiation and Drafting Considerations, Unique Issues

Description

Default provisions are some of the most important provisions in any commercial lease, especially in an uncertain commercial real estate market, because they allow for the landlord or tenant to enforce lease obligations and describe the remedies for breach. However, these terms are often under-negotiated by counsel and drafted using boilerplate language, leaving the terms subject to a court's interpretation which may not reflect the parties' intent.

Monetary and non-monetary defaults of a commercial lease can create unique challenges depending on the defaulting party, potentially leaving the commercial property unproductive while litigation progresses. Therefore, counsel for landlords and tenants should understand the potential issues so that they can ameliorate these concerns through careful negotiation and drafting of default provisions.

Considerations when drafting the lease's default provisions include clearly defining what actions constitute default, notice and cure requirements, termination and damages options, and possible methods of dispute resolution. Jurisdictional considerations should also be taken into account as these may vary depending on what provisions are allowed and to what extent (e.g., the enforceability of rent acceleration clauses in the lease).

Listen as our expert panel provides an in-depth look at negotiating and drafting commercial lease default provisions and how to manage the most common issues for landlords and tenants when it comes to drafting and enforcement.