Most businesses can’t exist without some kind of physical space, even in these days of a work-from-home workforce. It could be an office, retail space, or warehouse. The lease is the contract between the landlord and tenant. It lays down the rules of the relationship and states who’s obligated to do what for whom. If the relationship breaks down, it may lead to a breached lease.
The Lease Breach Checklist
When a potential or current client talks to me about a breached commercial lease, this is the checklist that comes to mind:
• Is there a valid lease? If not, unless there is another kind of legally binding contract or relationship between the two, there can’t be a breach because there’s nothing to breach
• If there is, was there a breach? Did a party not do something they were supposed to do or did something they shouldn’t have done? Does the party claiming the breach have evidence this bad thing happened? Might this be the result of poor communication or disorganization? A landlord may claim they haven’t been paid rent, but if a tenant can show a canceled check or prove there was an electronic transfer of money to the landlord, as far as the law’s concerned, rent was paid, and there was no breach
• If there is a breach, how much does it matter? Is this just an irritant, a minor problem inconveniencing a party, or does this go to the heart of the lease and is a material breach? If it’s a material breach that’s not excused by the lease language or the law, the other party has the option of ending the lease. If that’s the case, the landlord can start eviction proceedings. If it’s a nonmaterial breach, the party harmed can’t walk away from the lease. The tenant might sue the landlord for financial harm suffered as a result or demand they be allowed to pay a reduced rent to reflect the lesser value of the space
Examples of Commercial Lease Breaches
Here are circumstances where, if there’s a valid lease between the parties, and language in it applies to the situation, there’d be a breach by one party or another. Whether it’s a material breach might depend on the lease language and what’s going on:
• Failing to make necessary repairs: Most commercial leases state the landlord is responsible for the exterior walls, roof, and utilities. After receiving written notice of a problem, a landlord must repair it within a given timeframe
• Increasing rent: A lease may state the landlord must provide notice of a rent increase a certain number of days before it goes into effect. It may also limit how much rent can increase at one time. Violating either lease condition would be a breach
• Eviction without adequate notice: State law requires at least three days’ notice, and a lease agreement may state five to ten days. Giving less notice would breach the agreement
• Eviction after a partial rent payment: If the lease agreement doesn’t allow for an eviction after a partial rent payment, this would be a breach
• Not complying with move-out terms: Lease terms should cover what happens after a tenant leaves. If the landlord keeps a security deposit or makes deductions for improper reasons, it breaches the lease
• Failing to pay rent: The lease should say the rent amount is due by a specific date each month. A tenant would breach the lease by not paying it or paying it late
• Failing to maintain insurance: The lease probably requires the tenant to insure the space. Not getting insurance might expose the landlord to potential liability and would breach the lease
• Breaching the “covenant of quiet enjoyment”: A landlord would commit this breach by interfering with the tenant’s use of the property by not providing critical services like electricity, plumbing, air conditioning, or an elevator as promised
Potential breaches, material or not, are limited only by the parties and their contractual obligations under the lease. No matter which party you are to the lease if you believe you’re suffering because the other party breached it, or you’re the one accused of breaching the agreement, give us a call.
We’re Here to Help
If you’re a party to a commercial lease and have questions about a possible breach or want legal representation, call Anthony Burton at (949) 244-4207 or complete our online contact form today.
