Journal of Property Management

LEGAL EASE
LOOK TO ThE LEASE Understanding your agreements
can help resolve commercial tenant issues

DAVID K. TAYLOR IS A PARTNER IN THE NASHVILLE, TENN. OFFICE OF BRADLEY ARANT BOULT CUMMINGS, PLC, AND HAS A NATIONAL CONSTRUCTION LAW PRACTICE. DAVID CAN BE REACHED AT dtaylor@ babc.com OR 615.252.2396.

there are nO BlacK and White rules When it cOMes tO dealinG With PrOBleM tenants. OBviOusly Much dePends On the MarKet and whether it is better to have a continually late paying tenant or an empty space. Often, the only hope landlords have to receive payments owed is to bend the rules. The important part, however, is that they keep up with “work out” agreements which are mutual agreements between landlords and tenants to reschedule payments or modify payment terms. Landlords should document these agreements and make sure the lease provisions are adhered to in all respects.

The inclusion in a commercial lease of a clause permitting the property manager to terminate a lease due to a breach of contract is no assurance that a court will enforce the clause. Under most state laws, “forfeitures” of leases are not favored and judges are normally reluctant to terminate leases. To justify termination, the general rule is that a breach by the tenant must be a substantial violation. Abandonment, failure to pay rent and property taxes always justify termination.

It goes without saying that landlords must
read the lease and comply with the default pro-
visions before placing a tenant in default or ter-
minating the lease. Any court, in a subsequent
action, will look favorably toward the tenant,
and construe the lease (usually drafted by the
landlord) against the landlord. This includes,
but is not limited to, giving notice to the proper
people at the proper address in the lease, speci-
fying the section of the lease which the tenant
has violated and giving the tenant the requisite
time to correct the violation called for within
the lease. If a “default” notice does not clearly
state that the lessee is in default, a court may
hold the notice as insufficient. Some courts hold
that an improper and premature default letter
can be a constructive eviction of the tenant,
ending any future liability for rent.