Presenting a live 90-minute webinar with interactive Q&A Lease Enforcement and Remedies: Structuring Key Provisions for Eviction, Self-Help, Injunction, Action for Damages THURSDAY, MAY 25, 2017 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Douglas M. Bregman, Principal, Bregman Berbert Schwartz & Gilday , Bethesda, Md. Greg K. Hecht, Principal, Hecht Walker , Atlanta Jon Jordan, Principal, Hecht Walker , Atlanta The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Lease Enforcement and Remedies: Structuring Key Provisions for Eviction, Self- Help, Injunction, Action for Damages Douglas M. Bregman, Principal Bregman, Berbert, Schwartz & Gilday, LLC 7315 Wisconsin Avenue, Suite 800 West Bethesda, Maryland 20814 301.656.2707
Default Provisions • Default provisions are a critical aspect of any commercial lease • They generally control the rights of the parties in the event that either fails to live up to its obligations • “Events of Default” provisions explicitly enumerate the situations that will constitute default under the lease • In the event of a tenant default, most commercial leases provide the landlord with a number of remedies in addition to those provided by law • These remedies are set forth in default provisions • Default provisions typically fall into two categories: monetary and non-monetary 6
Events of Default Sample Events of Default Provision- In addition to those events or circumstances described in this Lease as an Event of Default, each of the following shall constitute an "Event of Default" : (a) Tenant's failure to make when due any payment of the Base Rent , additional rent or other sum; provided, however, that with respect to the first such failure in any twelve (12) month period only, no Event of Default shall be deemed to have occurred unless such failure continues for a period of five (5) days after Landlord delivers written notice thereof to Tenant; (b) Tenant's failure to perform or observe any covenant or condition of this Lease not otherwise specifically described in this Section; provided, however, that with respect to the first such failure as to any particular Article of this Lease in any twelve (12) month period only, no event of default shall be deemed to have occurred unless such failure continues for ten (1O) days after Landlord delivers written notice thereof to Tenant, or such shorter period as is appropriate if such failure can be cured in a shorter period; provided, however, that such cure period shall not be applicable if, in Landlord's sole and absolute discretion, such failure raises a life/safety issue with respect to the Building or its occupants or visitors, including but not limited to, a threat of personal injury or continuing physical injury to the Building, or if such failure is affecting another tenant's use or occupancy of the Building or its premises; (c) Tenant's failure timely to vacate and surrender the Premises in the condition required under this Lease at the expiration or earlier termination of the Lease Term; (d) Tenant's abandonment of or failure to occupy continuously the Premises, if Tenant also fails to pay Rent; (e) an Event of Bankruptcy as specified in Article XX; (f) Tenant's dissolution or liquidation; (g) any Environmental Default as specified in Section XX; or (h) any subletting, assignment , transfer, mortgage or other encumbrance of the Premises or this Lease not permitted by Article XX. 7
Events of Default (cont.) Landlord’s Perspective: • In general, a landlord wants to streamline the default process by not self- imposing too many requirements before the tenant is deemed to be in default • For instance, an events of default provision requiring the landlord to provide written notice before the tenant is considered in default should be avoided from the landlord’s point of view Tenant’s Perspective: • On the other hand, the tenant will always seek language that requires prior written notice with an opportunity to cure before the landlord may exercise its remedies • Such a provision will allow the tenant to avoid forfeiture of its leasehold rights based upon an inadvertent mistake 8
Monetary Default • Monetary default occurs when a tenant fails to meet a financial obligation due to the landlord under the lease (e.g., rent) • In addition to rent, monetary default could involve a tenant’s failure to pay common area maintenance fees, operating expense pass throughs, taxes, or repair/improvement costs • Monetary default provisions specify a tenant’s liability in curing such a default Sample Monetary Default Provision- If Tenant fails to make any payment of Base Rent, additional rent or any other sum on or before the date such payment is due and payable (with exception to any grace period specified in Section XX), then Tenant shall pay to Landlord a late charge of five percent (5%) of the amount of such payment. In addition, such payment and such late fee shall bear interest at the Default Rate from the date such payment or late fee, respectively, became due to the date of payment thereof by Tenant; provided, however, that nothing contained herein shall be construed as permitting Landlord to charge or receive interest in excess of the maximum rate then allowed by law. Such late charge and interest shall constitute additional rent due hereunder without any notice or demand. 9
Monetary Default (cont.) Landlord’s perspective: • When drafting monetary default provisions, landlords seek to 1) collect the unpaid payment in a timely manner and 2) discourage the tenant from defaulting again, and 3) charge a late fee and interest • With respect to these provisions, landlords are often reluctant to provide anything beyond a minimal written notice requirement Tenant’s perspective: • Because landlords use these provisions to discourage monetary default, tenants should watch out for overly burdensome penalties such as excessive late payment fees and interest rates • From a tenant’s point of view, these provisions should impose a written notice requirement on the landlord, however short it may be; that way the tenant will have time to cure 10
Non-Monetary Default • A non-monetary default means the tenant has failed to perform some duty which does not include the payment of money • Examples of non- monetary default may include the lapse of a tenant’s liability insurance required under the lease or the wrongful assignment or subletting of the premises Sample Non-Monetary Default Provision- An Event of Default shall occur if Tenant shall fail (other than a Monetary Default) to comply with any term , provision or covenant of this Lease, including, without limitation, the Rules and Regulations, which failure is not cured within thirty (30) days after delivery to Tenant of written notice of the occurrence of such failure, provided, however, that if the failure identified is not reasonably capable of being cured within such thirty (30) day period for reasons which are beyond the reasonable control of Tenant , then such thirty (30) day cure period shall be extended for an additional reasonable amount of time as may be necessary for Tenant to effect such cure, as long as Tenant proceeds diligently to effect such cure upon its receipt of Landlord’s written notice. 11
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