8 Remedies for Noncompliance with Commercial Lease Terms


Landlords have a variety of remedies available to them for a tenant’s noncompliance with the terms of the lease. Effective remedies are also available to tenants for the landlord’s breach of the lease provisions.


Remedies Available to the Landlord

Commercial leases are frequently written by landlords with innumerable covenants, conditions, and requirements for the tenant to meet. Many of these can be negotiated. If a tenant is in default, the landlord has a number of remedies at its disposal. The landlord may exercise more than one remedy, either concurrently or in the future.

Termination

In most cases, a lease allows the landlord to terminate the tenant’s possessory interest in the leased premises upon a tenant’s default. Because the lease termination may end the tenant’s obligation to pay rent, a landlord may not immediately want to terminate the lease. Landlords should include a survival clause in their leases that converts the rent obligation into an obligation to pay damages due to the tenant’s breach. With such a provision, the landlord can continue to collect rent as damages.

Eviction

When a tenant is evicted by the landlord, the tenant is no longer liable to pay rent, unless the lease states otherwise. However, the landlord can still ordinarily sue for collection of the rental amounts owing under the lease as damages if the landlord cannot relet the premises for the same rental amount for the balance of the lease.

Lawsuit for Rent and Damages

A landlord can file a suit for unpaid rent and other damages after or instead of evicting the tenant for failure to comply with the lease terms. This type of suit can be filed without requiring that the tenant be removed from the property.

Security Deposit

The tenant’s security deposit can be applied by the landlord to unpaid rent or to remedy damage to the premises. The use of security deposits is common in all states and jurisdictions and can be found in many types of leases, whether industrial, office, or residential. 

Distrant and Distress for Rent

Under the common law, the landlord had a right of distraint and a remedy known as distress for rent, whereby the landlord could enter the tenant’s property, seize the tenant’s goods, and hold them for public sale. The landlord was then authorized to apply the proceeds of the sale to unpaid rent. Obviously, this remedy was drastic and could put a tenant out of business. As a result, this action for unpaid rent has not been favored in the United States and has been abolished in most states. In other states, distraint has been modified by statute to curb the potential for landlord abuses or has been replaced by a statutory lien for the benefit of the landlord.

Remedies Available to the Tenant

The number of tenant remedies appears more limited than that available to landlords. But a tenant is not without recourse when a landlord defaults.

Tenant's Cure Rights

A tenant’s response to a landlord’s default depends on whether the lease covenants are dependent or independent. If the obligations are dependent, then the tenant does not have to abide by the lease terms (such as payment of rent) until the landlord cures any defaults. In some instances, a tenant with enough negotiating leverage can insist a clause in the lease that permits the tenant to cure the landlord’s default and then to deduct the cost of the cure from rental payments.

Constructive Eviction

It can be used by a tenant as a defense for nonpayment of rent or as a justification for termination of the lease. As noted above, a constructive eviction occurs when a landlord substantially interferes with a tenant’s use or enjoyment of the leased premises.

Lawsuit for Damages, Reformation, or Rescission

If a tenant suffers damages as a result of the landlord’s default, the tenant may sue the landlord to recover those damages. In addition, under certain circumstances, a tenant may sue for the equitable remedies of reformation or rescission. If a lease is signed but is later determined to be based on a landlord’s fraud or mistake, then a court may reform the lease to make it reflect the parties’ true intentions.

This article is adapted from BOMI International’s Law and Risk Management, part of the RPA® designation program. More information regarding this course or BOMI International’s High-Performance Sustainable Buildings credential (BOMI-HP®) is available by calling 1.800.235.2664. Visit BOMI International’s website, www.bomi.org.

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