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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:
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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.
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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.
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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.
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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)).
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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.
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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.
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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.
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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.
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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.
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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.
Address:
Cumberland Building
800 East Broward Boulevard, Suite 710
Fort Lauderdale, FL 33301
Phone: 954-467-7744
Fax: 954-467-7905
E-mail: law@tuckertighe.com
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