In today's Freedom Friday blog and email newsletter, I want to continue to talk about commercial leases, and another topic related to that which does not come up often enough, and that's how to avoid defaults in your commercial lease.  Not how to avoid having default terms in the lease itself, but how you as a commercial tenant can avoid defaulting on your commercial lease, which can be very detrimental to your small business.  In today's Freedom Friday blog and email newsletter, I'm talking about, “How to avoid defaults in your commercial lease.”

First of all, a default occurs when a party does not fulfill its obligations under a lease.  This may include not paying rent, breaching covenants, or otherwise violating the terms of the lease.  When a default occurs, the lessor (or landlord) has specific rights and remedies, and the tenant also has rights and defenses.  The landlord's rights include initiating eviction proceedings for non-payment of rent, or another substantial breach of the lease.  The landlord can also pursue damages against the tenant as compensation for financial losses which were a result of the tenant's default.  Damages may include unpaid rent, repair costs, and other expenses incurred because of the tenant's actions.

The tenant also has rights and defenses in the event of a default.  First, tenants may have a cure period to remedy or cure the default before facing legal consequences like an eviction or other penalties.  This period of time would allow a tenant to fix the issues and maintain their tenancy.  The parties can also negotiate to find alternative solutions to handle the default and avoid litigation.  These solutions may include payment plans, temporary reductions of rent, or other mutually agreed upon arrangements.  Tenants may also have legal defenses against wrongful defaults or unreasonable demands on behalf of the landlord.  These defenses ensure that tenants are not unfairly penalized and can challenge actions which may not comply with legal standards.

Defaults in a lease agreement can strain the landlord-tenant relationship (and ultimately break it), leading to mistrust and potential litigation.  For a landlord, persistent defaults may result in lost revenue, legal fees, and challenges in re-leasing the property, especially if the former tenant caused significant damage to the property.  A landlord should issue a formal notice of default to the tenant that outlines the breach and either what action the tenant should take to correct the matter, or in some cases, if damages have been monetized, a dollar amount the tenant (or former tenant) must pay to avoid a lawsuit.  In some cases, it may be appropriate to hire an attorney and have a formal demand letter sent, especially to a former tenant who may have damaged the property and then moved out.  Also, if the lease agreement allowed for mediation, that may be a requirement before a lawsuit is filed.

Thinking about starting a small business?  Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth?  Please contact me at [email protected] to schedule a FREE strategy session.

For more information about Liberty Legal Solutions, LLC, please visit our website at http://www.libertylegalok.com/