Common Commercial Landlord Breaches

Common Commercial Landlord Breaches

A difficulty lawyers may have when representing commercial tenants is that usually problems erupt when they cannot pay the rent and have let months go by without confronting the problem or, worse, have made damaging admissions in their attempt to gain a concession.

In general, early analysis is key. First, analyze your business revenue and expenses. When you signed the lease, you must have thought you could pay the rent; what happened? Second, analyze the lease in the context of the location. Do you need all the space that you have leased? Could it be subdivided?  Third, determine your leverage. Has the landlord breached the lease? Can the landlord (or you) easily obtain a replacement tenant? Is bankruptcy a realistic option? Are there other reasons the landlord would like to keep you as a tenant or get rid of you?

Common landlord breaches include the following:

Breaches of Representations and Warranties

Does the lease or any other documents given to you by the landlord represent or promise the condition of the space, the services they will provide, or their duties with respect to the condition of the property?

Build Out

Did the landlord promise to build out the space and then stop short of completing the job or do it in a shoddy way?

Maintenance

Failure to make timely repairs can ruin your business. Take pictures. Keep a diary of the landlord’s defalcations.

CAM Charges

There have been cases where a landlord was alleged to accidentally on purpose miscalculate common area maintenance charges due per tenant. In other cases, maintenance providers are companies in which the landlord has an interest, which can lead to above-market charges by the service providers.

A study of the lease can result in discovering that you are paying for more square footage than you actually lease, that the landlord has taken over some space that actually belongs to you, or that you are paying for more space than you actually agreed to lease. Each case can be different.

Litigation can be dangerous for a tenant. Typically late payments require payment of a default interest rate that can be very high and attorney fees for the prevailing party—that is, the landlord if they win the case. Delay can seem to help a tenant and frustrate the landlord, and it can do both things in some cases, but it may result in interest charges and attorney fees that just dig a bigger hole for the tenant. Be especially careful of signing personal guarantees. If you have signed one, any and all options to negotiate or litigate with the landlord have to take this into account.